The seemingly endless freefall of Terra (LUNA) affected two decentralized finance (DeFi) protocols due to a price discrepancy as the Chainlink (LINK) price feed for LUNA gets suspended over extreme market conditions.
Avalanche-based liquidity protocol Blizz Finance reported that as the price of LUNA was stuck at $0.10, attackers were able to deposit millions of LUNA to “borrow all the collateral.” As a result, Blizz Finance mentioned that its protocol was drained before its team could pause. The team apologized to those who were affected.
We have built on the AVAX ecosystem in good faith with the expectation that @chainlink oracles would behave as expected. Sorry to those affected.
— Blizz Finance (@BlizzFinance) May 13, 2022
In an official statement, Venus Protocol explained that when Chainlink paused the LUNA price feed, the LUNA price on their platform remained at $0.107 while the market price was at $0.01. The platform reportedly lost $11.2 million because of the price suspension. However, the platform noted that it will utilize its risk fund to bring remedy to this shortfall.
While it seems like the cause of the fiasco is the suspension of the Chainlink price feeds, some believe that the losses were due to the protocols’ negligence. Twitter user TheSoftwareJedi pointed out that Chainlink’s feeds have the tools necessary to avoid the problem and that it’s the protocols’ fault for not using them.
Meanwhile, the Terra blockchain was halted as its token dropped by more than 99%. According to Terraform Labs, the blockchain network was discontinued to prevent governance attacks. However, its team coordinated to restart the network almost immediately.
As LUNA continued to fall, crypto exchange Binance delisted its LUNA/USDT pair. Taking precautionary measures, the exchange announced Thursday that it will delist the pair if the LUNA price goes below 0.005 USDT. LUNA has already fallen below that price point and is now trading at $0.000029 according to coin information site Coingecko at the time of writing.
This article is strictly for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. CryptosOnline.com does not provide investment, tax, legal, business or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any loss or damage caused or alleged to be caused by, or in connection with, the use of or reliance on any content, goods, services or opinions mentioned in this article.
#Bitcoin #Crypto #Cryptocurrency