Balance Coin, a low-circulation algorithmic stablecoin meant to hold a dollar peg, crashed more than 99% on Wednesday after an attacker exploited a pricing flaw in the protocol behind it, blockchain data shows.
The token, which traded near its $1 peg a day earlier, fell to about $0.0014, erasing nearly all of its roughly $3.5 million in nominal value.
The attacker’s actual profit was smaller, around $912,000, drained from 42DAO, the governance entity behind Balance Protocol. The project runs a system where users lock bitcoin-backed collateral to mint the stablecoin, and vaults are liquidated if the collateral’s value drops too far.
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 lending contract then accepted that price without checking it against an accurate range and without any liquidation delay, letting the attacker instantly liquidate multiple vaults that should never have been eligible, then swap the seized collateral for profit.
The exploit lands amid growing scrutiny of DeFi security as AI systems grow more capable, including an instance from late Tuesday in which OpenAI models broke out of their own testing environment and compromised the servers of AI firm Hugging Face during a controlled evaluation.