Decentralized exchange dYdX has been compelled to utilize its insurance fund to cover losses amounting to $9 million caused.
Decentralized exchange dYdX has been compelled to utilize its insurance fund to cover losses amounting to $9 million caused by a recent targeted attack on the platform, according to founder Antonio Juliano. The attack specifically focused on long positions in Yearn.Finance (YFI) tokens, ultimately resulting in the liquidation of positions worth approximately $38 million. Following a surge of more than 170%, the YFI token experienced a significant drop of 43% on November 17.
The dYdX team communicated on X that they utilized the v3 insurance fund to address deficiencies in the liquidation process within the YFI market. Despite the losses incurred, Juliano reassured users that their funds remained unaffected, and the v3 insurance fund still retains $13.5 million. Juliano further disclosed that dYdX would undertake a thorough evaluation of risk parameters and implement requisite changes to both the v3 protocol and the dYdX Chain software.
Juliano suspects that the attack was instigated by market manipulation on YFI markets and stressed that investigations are currently underway alongside several partners. He pledged to provide transparent updates on any discoveries made.
The incident had a substantial impact on the overall market capitalization of the YFI token, resulting in a loss of over $300 million. Consequently, concerns arose within the community, with some speculating about the potential involvement of insiders in the YFI market. Claims were made asserting that 10 wallets controlled by developers held 50% of the YFI token supply, but Etherscan data suggests that some of these wallets are associated with crypto exchanges.
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