Balance Coin Crashes 99% After Attacker Feeds a Fake Bitcoin Price Into 42DAO

Balance Coin, a small algorithmic stablecoin built to hold a dollar peg, collapsed more than 99% on Wednesday after an attacker manipulated the price feed behind its lending protocol and drained roughly $912,000 in a single transaction, on-chain data and security researchers show. The token, which sat near its $1 target a day earlier, was most recently trading just below $0.0014.

The money came out of 42DAO, the governance entity behind Balance Protocol, which lets users lock bitcoin-backed collateral to mint the stablecoin and liquidates those vaults if the collateral falls too far in value. According to security firm SlowMist, the attacker forced an abnormally low Binance-peg Bitcoin (BTCB) price into the protocol’s oracle, then used it to seize collateral that should have been nowhere near liquidation.

SlowMist described the attack in a post on X: “A single-transaction combo exploited the missing price protection and liquidation delay in Maker-style system, allowing an attacker to liquidate multiple BTCB vaults using an abnormally low oracle price and profit from the arbitrage.” Because the lending contract accepted the fake price without checking it against a sane range and imposed no delay before liquidations, the attacker could clear multiple vaults instantly and swap the seized collateral for profit. Fellow security firm PeckShield pegged the loss to 42DAO at about $915,000.

Oracle manipulation remains one of the most reliable ways to break a lending market, and Balance Coin joins a long line of protocols undone by a price feed they trusted too much. The collapse erased nearly all of the token’s roughly $3.5 million in nominal value, leaving remaining holders with a stablecoin worth a fraction of a cent.

Related Listen: Why Any DeFi Protocol ‘Lives and Dies by Its Oracle’ and How to Strengthen Them

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