The crypto market suffered a robust crash on Thursday morning UTC, which despatched costs of main currencies like Bitcoin (BTC) and Ether (ETH) tumbling in extra of 10%.

When merchants rush for the exits, the worth of stablecoins usually enhance because the demand for stability rises. In at this time’s crash, nonetheless, the impact grew to become notably pronounced on Dai (DAI), which briefly traded for $1.3 between 7 and eight AM UTC.

Dai/USD value on Coinbase, courtesy of TradingView

Most notably, DAI traded at this inflated valuation solely on Coinbase and Uniswap, whereas different exchanges together with Kraken and Bitfinex appear to have maintained a comparatively steady value.

Dai/USD value on Bitfinex, courtesy of TradingView

Coinbase and Uniswap are the 2 exchanges utilized by Compound’s Open Value Feed oracle. The previous acts because the baseline, whereas the latter is used as a sanity verify and anchor. Nonetheless, it seems that Uniswap failed in its operate and likewise posted a a lot larger value than regular.

Compound’s liquidation this morning amounted to $89 million, of which about $52 million got here from DAI, in keeping with knowledge from DuneAnalytics.

One liquidation particularly is notable for its extraordinarily massive measurement of 46 million DAI repaid.

As DeFi researcher Sam Priestley explained, this liquidation was carried out on a leveraged COMP farmer, who used USD Coin (USDC) and DAI collateral to energy recursive borrowing in the identical currencies. The obvious enhance in DAI value put the account under the liquidation threshold.

The liquidator seized virtually 2.4 billion cDAI, value roughly $50 million with a value of $0.0209, whereas returning simply $46 million in DAI. That is anticipated habits given Compound’s present liquidation incentive of 8%.

The transaction in query concerned using a flash swap from Uniswap and calls to replace Compound’s oracle. One other 4 transactions issued by the identical liquidator eliminated an extra $6 million in debt.

The occasion highlighted the hazards of counting on only a few knowledge factors for oracles, Chainlink (LINK) founder Sergey Nazarov advised Cointelegraph. “We predicted this very exploit of centralized oracles and poor knowledge high quality over a yr in the past,” he mentioned, mentioning his explanation of the dangers of utilizing a single alternate. He continued: 

“DeFi protocols that depend on centralized oracles that pull knowledge from single exchanges, DEXes or in any other case, are inadvertently placing consumer funds in danger. […] The Chainlink community was unaffected by this exploit as a result of we supply knowledge from a number of main knowledge suppliers and tons of of exchanges, ensuring we seize the real-world value of a cryptocurrency via correct market protection.”

Whereas there isn’t a proof to recommend lively manipulation, the truth that DAI value jumped particularly on the exchanges utilized by Compound’s oracles might draw suspicion. Generally, the liquidation provides to the latest flash mortgage hacks to spotlight DeFi’s extreme reliance on only a few knowledge sources as oracles, Nazarov concluded.