The seemingly endless free fall of Terra (LUNA) affected two decentralized finance (DeFi) protocols due to a price discrepancy, as Chainlink’s price feed for LUNA was suspended due to extreme market conditions.
Avalanche-based liquidity protocol Blizz Finance reported that as the price of LUNA was stuck at $0.10, a group of attackers were able to deposit millions of LUNA to “borrow all collateral.” As a result, Blizz Finance mentioned that their protocol was dried up before their team could take action. The team apologized to those affected.
We have relied on the AVAX ecosystem in good faith with the expectation that @link of the chain the oracles would behave as expected. I feel sorry for those affected.
— Blizz Finance (@BlizzFinance) May 13, 2022
In an official statement, Venus Protocol explained that when Chainlink paused the LUNA price feed, the price of the token on its platform stood at $0.107, while the market price was at $0.01. Apparently the platform lost USD 11.2 million due to the suspension of price feeds. However, the platform indicated that it will use its risk fund to remedy this shortfall.
Although it seems that the cause of the fiasco is the suspension of Chainlink’s price feeds, some believe that the losses were due to negligence of the protocols. Twitter user TheSoftwareJedi he pointed that Chainlink feeds have the necessary tools to avoid the problem and that the protocols are to blame for not using them.
In the meantime, the Terra blockchain was paralyzed when its token fell by more than 99%. According to Terraform Labs, the blockchain network was put on pause to prevent governance attacks. However, his team coordinated to restart the network almost immediately.
As LUNA continues to fall, cryptocurrency exchange Binance delisted its LUNA/Tether (USDT) pair. Taking precautionary measures, the exchange announced on Thursday that it would withdraw the pair if the price of LUNA fell below 0.005 USDT. LUNA has already dipped below that price point and is trading at $0.000029 at press time, according to coin information site CoinGecko.
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