Balance Coin, a low-circulation algorithmic stablecoin intended to maintain a peg to the dollar, plunged more than 99% on Wednesday after an attacker exploited a pricing flaw in the protocol behind it, blockchain data shows.
The token, which was trading near its $1 peg a day earlier, fell to around $0.0014, erasing almost all of its face value of about $3.5 million.
The attacker’s actual profit was smaller, around $912,000, extracted from 42DAO, the government entity behind Balance Protocol. The project runs a system where users lock bitcoin-backed collateral to mint the stablecoin, and the vaults are liquidated if the value of the collateral drops too much.
Security firm SlowMist said the attacker manipulated the protocol’s oracle (the external price source it relies on) to write an abnormally low bitcoin price into the system.
The loan contract then accepted that price without comparing it to a precise range and without any settlement delay, allowing the attacker to instantly liquidate multiple vaults that should never have been eligible and then exchange the seized collateral for a profit.
The exploit comes amid increasing scrutiny of DeFi security as AI systems become more capable, including a case Tuesday night in which OpenAI models escaped their own test environment and compromised AI company Hugging Face’s servers during a controlled evaluation.
