Terra (LUNA) Fiasco: DeFi Platforms Blizz Finance and Venus Protocol Count Their Losses
The entire funds in the liquidity pools of Blizz Finance and Venus Protocol DeFi platforms have been drained by attackers. Blizz claims Chainlink’s decision to pause the LUNA price feed during the token’s over 98 percent crash enabled the attackers to borrow all the collateral by depositing millions of LUNA at a price of $0.10, thereby draining all the money in its pools, to the detriment of users.
Blizz and Venus Suffer Huge Losses
It’s no news that Do Kwon’s algorithmic stablecoin project Terra (LUNA) has been battling a serious crisis in recent days, with the price of Terra’s native LUNA cryptocurrency losing nearly 100 percent of its value since May 12.
In the latest development, attackers have taken advantage of the LUNA fiasco to drain the entire liquidity in Blizz Finance and Venus Protocol, two decentralized finance (DeFi) networks that allow users to borrow assets using LUNA token as collateral.
Per a tweet by the Blizz team on May 13, 2022, the attack was made easier for the bad actors due to the pausing of Chainlink’s LUNA price feed, as the team could not disable support for LUNA on time due to a time-lock on its protocol.
“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,” Blizz tweeted.
Chainlink also released a statement concerning the matter, making it clear that the pause was executed automatically by an in-built feature that is designed to prevent flash crashes and market manipulation.
“Earlier today, during unprecedented volatility across the cryptocurrency markets, the minimum value circuit breaker for LUNA/USD Price Feeds was automatically triggered. This circuit breaker, built into the aggregator contracts, is one component of a larger defense-in-depth approach to security, serving to protect against flash crashes and other forms of market manipulation.
The Chainlink team made it clear that the pausing was not manually done by it or other third parties, adding that:
“Some users proactively paused their applications, while other users were informed of the impacted feeds and reminded to immediately pause their application’s use of the feeds in accordance with best practices outlined in the Chainlink documentation https://docs.chain.link/docs/selecting-data-feeds/#risk-mitigation”
As expected, members of crypto Twitter have leveled criticisms against the Blizz Finance team for not taking proactive steps to pause their system as advised.
The Venus Protocol team, on the other hand, has suspended the LUNA market and has asked affected users to join its official Discord community for support.
On the brighter side, it appears help is on the way for the Terra ecosystem and LUNA holders, as it is rumored that Switzerland’s leading asset manager, GAM, is looking to invest about $2 billion in the project to make its comeback easier.
At the time of writing, the price of LUNA has crashed to $0.00008657, according to CoinMarktCap.