Quake! The Iron Finance Titanium token has suffered from what is being called the world’s first large-scale crypto bank run. After touching a high of $64 per token on Wednesday, the project slid to near zero.
It remained worthless on Thursday.
In what is a clear look at just how exiting yet risky the world of decentralized finance is, the TITAN token lost all of its value in a matter of hours. The DeFi space suffers from major risks centered around smart contract exploits, flash loans, and alleged bank runs.
And one such threat became a reality for Iron Finance, when the team team’s native token lost all of its value in a matter of hours.
Dear community, please withdraw liquidity from all pools.
We will share a post-mortem as soon as we have a better understanding of this bank run.
USDC collateral is available for redemption as normal:https://t.co/tOacyNUVeL
Iron Finance Team pic.twitter.com/I9BAZReLHk
— IRON Finance (@IronFinance) June 17, 2021
After sharing the news on Twitter, the team explained the bank run in detail in a post mortem the following day, and talked about how the project suffered in a way that they did not think would happen.
“Around 10am UTC on 16-June-2021, we noticed some whales began to remove liquidity from IRON/USDC, then sold TITAN to IRON and then IRON to USDC directly to liquidity pools instead of redeeming IRON, which caused the IRON price off-peg. TITAN dropped from 65$ to 30$ in 2 hours, which later recovered in 1 hour to 52$ and IRON fully recovered its peg.”
Following the recovery, the Iron Finance team noticed that a few big holders started selling again, which resulted in a lot of users panicking and the entire situation causing a negative feedback loop.
At some point, the price of TITAN became so low — close to 0 — that it caused the redeem contract to revert the redeem transactions.
“What we just experienced is the worst thing that could happen to the protocol, a historical bank run in the modern high-tech crypto space. Remember that Iron.finance is a partially collateralized stablecoin, which is similar to the fractional reserve banking of the modern world. When people panic and run over to the bank to withdraw their money in a short period, the bank may and will collapse.”
Goes without saying that a number of Iron Finance investors lost big, with commentary across Twitter and Reddit revealing that people lost thousands upon thousands of dollars.
Of course, the Iron Finance team was criticized immediately following the incident, and people were not pleased with the situation. But as far as the maintainers are concerned, they say that they have learned a great deal from this, and while nothing could be fixed, they plan on continuing their journey.
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