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With attackers exploiting discrepancy in LUNA price feed, DeFi protocols confirm losses

  • Two DeFi protocols reported that the Chainlink price feed for LUNA remained at $0.10 while the actual price slipped to $0.01.
  • The Tera ecosystem has halted the Terra blockchain and thus stopped processing LUNA transactions.

The collapse of the Terra ecosystem over the last week has sent shockwaves across the entire crypto market. The ripple effect of the LUNA price crash also spreads across the decentralized finance (DeFi) market.

Recently, two DeFi protocols have declared losses following the LUNA price feed discrepancy. The extreme volatility and market conditions have led to the suspension of the Chainlink price feed for LUNA.

The LUNA price has collapsed by 99.99 percent in the last 24-hours and literally tanked to $0. However, Avalanche-based DeFi protocol Blizz Finance reported that the price of LUNA was stuck at $0.10. This is because the attackers could deposit millions of LUNA to “borrow all the collateral”. The official statement from Blizz Finance reads:

Chainlink pausing the LUNA oracle allowed several attackers to deposit millions of LUNA which is still worth $0.10 according to the Chainlink oracle to borrow all the collateral. The protocol has been drained before we could pause due to our timelock. We have built on the AVAX ecosystem in good faith with the expectation that @chainlink oracles would behave as expected. Sorry to those affected.

Venus Protocol declares $11 million in loss

Another DeFi protocol – Venus Protocol – declared losses to the tune of $11 million with Chainlink pausing the LUNA price feed. The LUNA price on the Venus protocol stayed at $0.10 while the actual price dropped to $0.001. Due to this price discrepancy, the Venus protocol lost a massive sum.

Thus, to de-risk this situation, Venus Protocol has paused itself by using PauseGuardian via multisig. The good thing is that it has decided to protect investors’ interests. The announcement reads:

Given the continued risks of the LUNA market and in order to eliminate the possibility of further shortfall, the community has asked to suspend the LUNA market effective immediately. Venus Protocol also has a Risk Fund that will be utilized to remedy the shortfall that resulted from this event.

Although there have been reports that the DeFi protocols were due to Chainlink price links, some point otherwise. Some users also think that it might be due to the protocol’s negligence. Twitter user @TheSoftwareJeddi writes that Chainlink already has the necessary tools to avoid such problems. However, the DeFi protocols failed to use them correctly.

Related: Terra halts its blockchain to prevent an attack as LUNA sinks to $0.00003, exchanges delist

Terra halts the entire blockchain

The Terra blockchain behind the UST stablecoin and the LUNA cryptocurrency has officially halted processing any further transactions. This happened for the second time in less than a day. The official announcement reads:

The Terra blockchain has officially halted at block 7607789. Terra Validators have halted the network to come up with a plan to reconstitute it. More updates to come.

Following the LUNA crash, popular exchange Coinbase reported major outages. On the other hand, crypto exchange Binance has suspended spot trading pairs for LUNA and UST.

As per the latest reports, Terra is reportedly negotiating a $3 billion bailout with Swiss Asset Manager GAM. This money could potentially help to re-establish UST’s peg to the U.S. Dollar. GAM says that it continues to see potential in the Terra ecosystem, and thus, it is lending its helping hand.

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