Decentralized exchange (DEX) dYdX fell victim to a “targeted attack” on November 17, resulting in the forced use of its insurance fund to cover $9 million in user liquidations. Antonio Juliano, founder of dYdX, thinks that the attack was aimed at the stock market. He also confirmed that it caused significant losses and market manipulation in the altcoin Yearn.Finance (YFI). Here are the details…
Allegation of planned attack for altcoin platform and project
According to the reports of the dYdX team on the official communication platform, the v3 insurance fund is used to eliminate gaps in the liquidation processes in the YFI market. The YFI token dropped a staggering 43% on November 17, sparking concerns in the crypto community and raising suspicions of a potential exit scam, especially considering it was up 170% in the previous weeks.
The alleged attack specifically targeted long positions in YFI altcoin assets on the exchange. It also led to the liquidation of positions worth approximately $38 million. Antonio Juliano expressed his belief that the trading losses and the sharp decline in YFI were a result of organized market manipulation. In response, he said:
This was a pretty clearly targeted attack against dYdX, including market manipulation of the entire $YFI market. We are investigating along with several of our partners and will be transparent about what we discover.
There are millions of dollars in the insurance fund
Juliano emphasized that the v3 insurance fund still holds $13.5 million. He then reassured users that no individual funds were affected by the incident. However, the altcoin announced a comprehensive review of risk parameters and potential adjustments to both v3 and dYdX Chain software.
The impact of the profitable attack went beyond the altcoin dYdX. cryptokoin.com As we reported, YFI deleted over $300 million in market value from its token. This, along with allegations that 50% of the YFI token supply was held in 10 wallets controlled by developers, led to speculation within the community about a possible insider deal. However, Etherscan data suggested that some of these holders were associated with crypto exchange wallets.
How will DYDX security be ensured?
dYdX founder Antonio Juliano announced a series of updates aimed at strengthening the platform’s security and functionality via social media on November 19. These updates to the altcoin project include:
- Simplifying market updates to improve liquidity generation.
- Updatability of maintenance margin function (not available in V3).
- Ability to adapt the maintenance margin function according to position size (not available in V3).
- Redesign of the liquidation engine.
- Restricting withdrawal requests for accounts with negative equity until the relevant positions are liquidated.
Juliano emphasized that these updates will play an important role in addressing recent events regarding YFI on dYdX and provide users with a safer trading environment. He also noted that dYdX maintains a steadfast focus on risk management and user security. At this point it outlined its commitment to gradually deliver more features.
$50 million worth of altcoins were liquidated in dYdX
Data analysis platform Arkham published an article that shed light on what happened after the fall of YFI. Due to the significant decline in the value of YFI, approximately $50 million of open positions in dYdX were liquidated. Notably, almost half of YFI’s open positions were initiated on dYdX. Arkham noted that YFI’s trading volume on dYdX is generally low. However, he emphasized that the recent fluctuation in the altcoin price caused open positions to reach approximately $60 million. This analysis provides context to dYdX’s challenges amid the targeted attack and subsequent market manipulation.
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