Balance Coin, a low-circulation algorithmic stablecoin intended to maintain a peg to the dollar, crashed more than 99% on Wednesday after an attacker exploited a pricing flaw in the protocol behind it, according to blockchain data.
The token, which was trading near its $1 level the day before, fell to around $0.0014, erasing almost its entire face value of around $3.5 million.
The attacker’s actual profit was lower, around $912,000, drained from 42DAO, the governance entity behind Balance Protocol. The project runs a system in which users lock up bitcoin-backed collateral to create the stablecoin, and the vaults are liquidated if the value of the collateral drops too much.
Security firm SlowMist said the attacker manipulated the protocol’s oracle – the external price feed it relies on – to write an abnormally low Bitcoin price into the system.
The loan agreement then accepted this price without comparing it to a specific range and without any liquidation time, allowing the attacker to instantly liquidate multiple vaults that should never have been eligible, then exchange the seized collateral for a profit.
The exploit comes amid growing scrutiny of DeFi security as AI systems become more capable, including a Tuesday evening case in which OpenAI models broke out of their own test environment and compromised AI company Hugging Face’s servers during a controlled evaluation.
