A Chainlink value feed’s alleged malfunction led to greater than $500,000 in liquidations on Might 29, sparking recent debate over the reliability of oracles in DeFi.
In response to stories, Chainlink’s value oracle for the deUSD stablecoin inaccurately reported its worth at $1.03. The inaccurate knowledge triggered liquidations for customers holding deUSD-denominated debt on Avalanche’s Euler Finance lending protocol.
The influence was extreme, particularly for these leveraging the asset, which is backed by real-world property (RWAs) and recognized for its high-yield potential.
deUSD, issued by Elixir, has a complete provide of $185 million, with $42.7 million circulating on Avalanche. Resulting from its yield profile, it has been extensively used as collateral, typically permitting merchants to leverage positions as much as 10x to chase outsized returns.
Nonetheless, that very same leverage turned catastrophic when the mispriced knowledge cascaded into compelled liquidations.
Business reacts to Chainlink’s alleged misstep
The incident reignited scrutiny round on-chain oracles. Critics argue these methods are weak to manipulation and errors, particularly when working in illiquid markets.
Omer Goldberg, founding father of Chaos Labs, took to X to criticize Chainlink, claiming that the oracle delayed a necessary value replace by 25 minutes.
He additionally urged the value feed would possibly rely too closely on APIs like CoinGecko, which he mentioned is inappropriate for stablecoin pricing.
Goldberg additional warned that utilizing volume-weighted common value (VWAP) in illiquid swimming pools exposes protocols to exploitation. He added:
“The purpose of the oracle is to safe worth and shield customers. If the oracle is ‘dumb’ and simply spits out pool costs, why even use Chainlink in any respect?”
Nonetheless, not all voices aligned with the criticism.
Chainlink’s Group Liaison, Zack Rynes, pushed again towards the allegations. He clarified that Chainlink merely displays aggregated market exercise and that it’s as much as particular person protocols to interpret or filter the information.
Rynes added {that a} single Curve pool accounted for half of the every day quantity that day and quickly pushed the value above $1, which Chainlink precisely captured in its VWAP. He wrote:
“Chainlink places the information customers need onchain within the format they need, the protocols are liable for guaranteeing that knowledge meets their necessities and implements any extra subjective checks or limits they need.”
In the meantime, Marc Zeller of the Aave Chan Initiative mentioned the fault lies in protocols treating unstable or illiquid property like mature collateral. He warned towards labeling danger shortcuts as innovation, saying it in the end exposes customers.
Zeller concluded:
“Chainlink did their job.”
Talked about on this article
