DeFi Protocols Report Significant Losses Amid Luna Price Exploit

Two decentralised protocols, Blizz Finance and Venus Protocol, have declared losses due to a LUNA price discrepancy after Chainlink’s price feed for the token got suspended over market conditions.

Attackers Take Advantage of Price Discrepancies

TerraUSD (UST) – the stablecoin issued by the Terra blockchain – suffered a sudden de-pegging last week, causing massive congestion across the DeFi market. Several centralised exchanges such as Binance had to halt LUNA trading amid the stablecoin frenzy.

A few days after the incident, Chainlink – an oracle network that provides real-time data for blockchain companies – decided to suspend the price feed for LUNA, whose price remained at US$0.107 on the platform while the actual market price was $0.01.

According to Blizz Finance, this decision allowed several attackers to deposit millions of LUNA tokens in the $0.107 price range to borrow all the collateral. The protocol stated that it was drained before the team could stop it:

Blizz Finance hasn’t disclosed the amount drained, or if it plans to reimburse affected users.

On the other hand, Venus Protocol issued a statement saying that Chainlink’s suspension of LUNA price updates had resulted in the loss of US$11.2 million for the protocol, which will use its Risk Fund to remedy the shortfall from this event:

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 utilised to remedy the shortfall that resulted from this event.

Venus Protocol blog post

While both protocols have fingered Chainlink as responsible for this incident, one Twitter user stated that it was the fault of negligent developers, adding that Chainlink feeds have a date time associated with the price data which the protocol failed to use: