A DeFi-focused altcoin project fell victim to a massive exploit due to price integration issues. The price has dropped by around 20% at the time of writing.
DeFi altcoin project exploited due to price integration issues
Arbitrage bots targeted the liquidity pool to take advantage of Mycelium (MYC) DeFi’s price inconsistency issue. Mycelium, a multi-product Web3 ecosystem, confirms that one of its liquidity pools has lost money due to price integration issues. In addition, the Binance API module also blocked the IP address of the protocol. Mycelium in particular failed to prevent the exploitation of ETH/USD pools.
According to the statement from the Mycelium team, the platform was exploited by an arbitrage bot on January 7, 2023. Arbitrage bots took advantage of the price difference of Ethereum (ETH) on the platform and began to abuse it by a large margin on the amount of liquidity.
The team want to address the situation occurring around the ETH-USD price feed that impacted MLP.
It appears that an issue developed overnight via 1 of the 3 data providers. While another data provider was down due to IP blocking. Causing a discrepancy in median price.
1/7
— Mycelium (@mycelium_xyz) January 7, 2023
“We would like to address the situation around ETH-USD price flow affecting MLP… Today, Bitfinex ETH-USD price flow started reporting very volatile prices by a large margin,” Mycelium team said. It causes the median price to have large “wicks of death”. After the team identified the impact, an investigation was immediately launched via communication shared via Mycelium Discord. From the initial detection, to the temporary suspension of the trades, to a correction applied, and to the continuation of the trades, it was about 2.5 hours.”
Mycelium ETH/USD pool exploited
The difference is due to the Bitfinex API, which started publishing highly volatile prices for the ETH/USDT pair in the morning. Meanwhile, other price streaming provider Binance was unavailable because it blocked the IP address associated with Mycelium. As a result, the system was unable to rebalance the price using a separate price integration. The Mycelium team only used data from Bitfinex and Coinbase due to the “not widely announced” Binance outage.
When the issue was discovered, the team launched an internal investigation and halted operations. According to the autopsy, the pool was closed for a total of 2.5 hours. Meanwhile, Mycelium’s net TVL dropped around 4% to 6%. Around the same time, the price of Mycelium (MYC) dropped more than 20% at one point. MYC is currently trading at $0.008726.
Mycelium experts found that the problems “cause MLP to fail by 4-6%”. Losses can be sensitive as the 24-hour trading volume for this pool exceeds $218 million in equivalent. To prevent such events from happening again, the protocol decided to implement stronger data monitoring, enhanced alerts and faster communication. As you follow on Kriptokoin.com, another DeFi project Balancer (BAL) asked liquidity providers to withdraw funds from five altcoin pools yesterday.
