1 day ago
A Chainlink terms feed’s alleged malfunction led to much than $500,000 successful liquidations connected May 29, sparking caller statement implicit the reliability of oracles successful DeFi.
According to reports, Chainlink’s terms oracle for the deUSD stablecoin inaccurately reported its worth astatine $1.03. The incorrect information triggered liquidations for users holding deUSD-denominated indebtedness connected Avalanche’s Euler Finance lending protocol.
The interaction was severe, particularly for those leveraging the asset, which is backed by real-world assets (RWAs) and known for its high-yield potential.
deUSD, issued by Elixir, has a full proviso of $185 million, with $42.7 cardinal circulating connected Avalanche. Due to its output profile, it has been wide utilized arsenic collateral, often allowing traders to leverage positions up to 10x to pursuit outsized returns.
However, that aforesaid leverage turned catastrophic erstwhile the mispriced information cascaded into forced liquidations.
Industry reacts to Chainlink’s alleged misstep
The incidental reignited scrutiny astir on-chain oracles. Critics reason these systems are susceptible to manipulation and errors, particularly erstwhile operating successful illiquid markets.
Omer Goldberg, laminitis of Chaos Labs, took to X to knock Chainlink, claiming that the oracle delayed an indispensable terms update by 25 minutes.
He besides suggested the terms provender mightiness trust excessively heavy connected APIs similar CoinGecko, which helium said is inappropriate for stablecoin pricing.
Goldberg further warned that utilizing volume-weighted mean terms (VWAP) successful illiquid pools exposes protocols to exploitation. He added:
“The constituent of the oracle is to unafraid worth and support users. If the oracle is ‘dumb’ and conscionable spits retired excavation prices, wherefore adjacent usage Chainlink astatine all?”
However, not each voices aligned with the criticism.
Chainlink’s Community Liaison, Zack Rynes, pushed backmost against the allegations. He clarified that Chainlink simply reflects aggregated marketplace enactment and that it is up to idiosyncratic protocols to construe oregon filter the data.
Rynes added that a azygous Curve excavation accounted for fractional of the regular measurement that time and temporarily pushed the terms supra $1, which Chainlink accurately captured successful its VWAP. He wrote:
“Chainlink puts the information users privation onchain successful the format they want, the protocols are liable for ensuring that information meets their requirements and implements immoderate further subjective checks oregon limits they want.”
Meanwhile, Marc Zeller of the Aave Chan Initiative said the responsibility lies successful protocols treating volatile oregon illiquid assets similar mature collateral. He warned against labeling hazard shortcuts arsenic innovation, saying it yet exposes users.
Zeller concluded:
“Chainlink did their job.”
The station Chainlink oracle ‘malfunction’ sparks $500k successful DeFi liquidations, reignites reliability debate appeared archetypal connected CryptoSlate.
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