Decentralized Exchange dYdX Forced to Use Insurance Fund After $9M Liquidation
On November 17, decentralized exchange (DEX) dYdX was compelled to tap into its insurance fund to cover $9 million in user liquidations. According to dYdX founder Antonio Juliano, the losses were the result of a “targeted attack” against the exchange.
The dYdX team reported on X (formerly Twitter) that the v3 insurance fund was utilized “to fill gaps on liquidations processes in the YFI market.” This came after the Yearn.Finance (YFI) token plummeted 43% on November 17, following a surge of over 170% in the previous weeks. The sudden price crash raised concerns within the crypto community about a possible exit scam.
Juliano stated, “This was pretty clearly a targeted attack against dYdX, including market manipulation of the entire $YFI market. We are investigating alongside several partners and will be transparent with what we discover.”
Despite the trading losses and the sharp decline in YFI, Juliano assured that the v3 insurance fund still holds $13.5 million, and users’ funds were not affected by the incident. “Even though no user funds were affected, we will also be conducting a thorough review of our risk parameters and making appropriate changes to both v3 and potentially the dYdX Chain software if necessary,” he noted on X.
The profitable trade wiped out over $300 million in market capitalization from the YFI token, leading to speculation within the community about a possible insider job in the YFI market. Some users claimed that 50% of the YFI token supply was held in 10 wallets controlled by developers. However, Etherscan data suggests that some of these holders are crypto exchange wallets.
Cointelegraph reached out to dYdX and Yearn.Finance’s teams for comment and is awaiting a response.
For more information, visit Beyond Crypto — Zero-knowledge proofs show potential from voting to finance.
❗Follow us on Twitter to get all the latest crypto news as soon as they're out! 🚀