Balance Coin Crashes 99% as Oracle Exploit Drains $912K From 42DAO

Algorithmic stablecoin Balance Coin (BLC) lost more than 99% of its value after an oracle pricing exploit allowed an attacker to manipulate the protocol’s liquidation mechanism, sending the token from nearly $1 to about $0.0014. The collapse wiped out almost all of the project’s nominal market capitalization, which had stood at roughly $3.5 million.

Blockchain security firm SlowMist said the attacker supplied the protocol with an artificially low Bitcoin price through its oracle, triggering the liquidation of vaults that should not have been eligible for liquidation. The exploit enabled the attacker to drain approximately $912,000 from 42DAO in a single transaction.

According to blockchain analytics platform Onchain Lens, the incident stemmed from weaknesses in the protocol’s risk controls. The platform said the protocol lacked oracle price deviation checks, allowing manipulated price data to be accepted without validation. It also cited the absence of a liquidation delay and minimum price protection, safeguards that could have helped prevent liquidations triggered by abnormal price movements.

The exploit highlights the risks associated with oracle-dependent decentralized finance protocols, where inadequate validation of external price feeds can expose platforms to significant financial losses.

Sources: CoinDesk, SlowMist, and Onchain Lens