The price discrepancy impacted two decentralized finance (DeFi) protocols as Terra (LUNA)’s endless freefall caused the Chainlink price feed to LUNA to be disrupted due to extreme market conditions.
With LUNA’s price stuck at $0.10, attackers were able to “borrow any collateral” by depositing millions of LUNAs, according to Blizz Finance, an Avalanche-based liquidity protocol. As a result, Blizz Finance noted that the protocol was exhausted before the team paused. The team apologized to those affected.
We built the AVAX ecosystem with the following expectations: @Chainlink Oracle works as expected. He apologizes to those affected.
— Blizz Finance (@BlizzFinance) May 13, 2022
Venus Protocol from Official Statement explanation When Chainlink paused the LUNA price feed, the platform’s LUNA price was $0.107 while the market price was $0.01. According to the platform report lost $11.2 million due to price disruption. However, the platform noted that it will utilize risk funds to address this shortfall.
Although the cause of the failure appears to be the disruption of the Chainlink price feed, some believe the loss is due to the protocol’s negligence. Twitter user TheSoftwareJedi pointed out Chainlink’s feed has the tools it needs to avoid problems, and it’s the protocol’s fault not to use them.
Relevant: Untethered: Everything you need to know about TerraUSD, Tether, and other stablecoins.
Meanwhile, the Terra blockchain was halted as tokens fell more than 99%. According to Terraform Labs, the blockchain network has been shut down to prevent governance attacks. However, the team made arrangements to restart the network almost immediately.
As LUNA continued to fall, cryptocurrency exchange Binance delisted the LUNA/Tether (USDT) pair. As a precaution, the exchange announced on Thursday that it would delist the pair if LUNA price drops below 0.005 USDT. According to coin information site CoinGecko, LUNA has already fallen below that price and is currently trading at $0.000029 at the time of writing.