Balance Coin stablecoin crashes more than 99% due to oracle exploit

Balance Coin, a low-circulation algorithmic stablecoin pegged to the dollar, crashes more than 99% after an attacker exploits a price error in the underlying protocol. The token falls from nearly $1 to just $0.0014, erasing virtually all of its nominal market value of around $3.5 million.

How the attacker operates

Security firm SlowMist explains exactly how the attack unfolds. The perpetrator manipulates the protocol’s oracle, the external price feed the system relies on for real-time exchange rate data. By feeding an artificially low Bitcoin price into the system, it appears as if the value of the collateral vaults drops far below the required threshold.

Balance Protocol uses a mechanism where users lock Bitcoin as collateral to mint the stablecoin. If the value of that collateral drops too far, the vaults are automatically liquidated. The attacker exploits this by liquidating vaults that would not normally qualify for liquidation, all within a single transaction.

Damage amounts to nearly one million dollars

The attacker’s actual profit is lower than the total destruction of market value suggests. In total, the perpetrator extracts approximately $912.000 from 42DAO, the governance entity behind Balance Protocol. This is a significant blow for a project of this size.

The attack fits into a broader trend where DeFi protocols dependent on external price feeds prove vulnerable to manipulation. Oracle exploits are a well-known attack vector in the crypto world, and this incident once again demonstrates how severe the consequences can be if the price input is not sufficiently secured. At the time of writing, the Bitcoin price stands at $66.000, a decline of 0.3% in the past 24 hours.