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 close to its $1 peg a day earlier, fell to around $0.0014, wiping out almost all of its roughly $3.5 million in nominal value.
The attacker’s actual profit was less, around $912,000, drained from the 42DAO, the governing body behind the Balance Protocol. The project runs a system where users lock bitcoin-backed collateral to mint the stablecoin, and vaults are liquidated if the value of the collateral falls 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 loan contract then accepted this price without checking it against an exact range and without any liquidation delay, instantly allowing the attacker to liquidate more boxes that should never have been eligible, and then exchange the seized collateral for profit.
The exploit lands amid growing scrutiny of DeFi security as AI systems become more capable, including a case late Tuesday in which OpenAI models broke out of their own test environment and compromised AI firm Hugging Face’s servers during a controlled evaluation.
