The reason could be the vulnerability of the oracle to stablecoin DAI.
A clear mistake or malicious attack on the DAI stablecoin quotation stream provided by the Coinbase oracle raised the price of the crypto asset to about $1.3, as a result of which some users of Compound were not secured by collateral, the value of which was lower than the loan amount. According to Loanscan, because of this, the user positions of about $89 million were eliminated on Compound.
Compound receives pricing data from Coinbase Pro. Based on the rules of the protocol, such a change in price could mean only one thing – the forced liquidation of the borrower’s position with a lack of security. According to Alex Svanevik, CEO of Nansen, the problem affected COMP’s third-largest “farmer,” which underwent $46 million in liquidation. Svanevik said:
“As far as I can tell, Compound worked exactly as it should. But there are questions for the oracle. “
Compound, the third largest DeFi platform, allows users to borrow crypto assets, such as DAI, from each other. However, in order to obtain a loan, the user must provide security exceeding the amount that he borrows. This means that all loans must have excess collateral. When the DAI price jumped due to an alleged attack on the oracle, positions were liquidated, as loans were not sufficiently secured.
For example, if a Compound user borrowed the equivalent of $100 in DAI, and then the price of the steeblockin rose to $1.3, this means that the amount of the user’s loan also increased to $130. However, if the user’s pledge is less than this amount, the loan will be considered insufficiently secured, and Compound will eliminate the position.
This is the largest liquidation on the platform since its existence. In July of this year, Compound liquidated items worth $6.3 million in 24 hours. Some industry members criticized Compound for relying on data from the centralized Coinbase platform to obtain price information.
Recently, Chainlink co-founder Sergey Nazarov said that attacks using quick loans for DeFi protocols will continue due to methods for obtaining price data by applications.