Analysis of the TITAN Token Collapse: Iron.Finance Rugpull or DeFi Bank Run?

TL;DR: Iron.Finance depends on arbitrage as their stabilizing mechanism for partially collateralized tokens. In the case of the TITAN token collapse, the time frame between its price feed oracle and the actual real-time prices of the market was too large causing users to become unprofitable and not protect the stabilization. As a result, TITAN dropped to zero and IRON lost its peg. The incident resulted in Iron.Finance losing more than $2 billion in the total value locked (TVL) in the protocol, dropping from $2.18 billion locked to less than $10.5 million. On June 16, 2021, Iron.Finance suffered an incident that resulted in TITAN, the administration nominal that backs the stablecoin Stablecoins possibly privately issued cryptocurrency or algorit … More IRON, crashing closely 100 % in what is being called “ the global ’ s first large-scale crypto bank run. ” As a solution of TITAN ’ second crash, the price of the IRON stablecoin moved off peg. This incidental was the leave of a design flaw—Iron.Finance lacked a proper stabilize mechanism. Without an adequate mechanism in place, when the TITAN token started collapsing the prices provided by the Price Feed Oracle were delayed and the col between these prices and real-time data made arbitraging unprofitable. Because Iron.Finance had relied on arbitrage users to help stabilize the monetary value of IRON, when arbitrage was no longer profitable the issue compounded. TITAN has an infinite provide and is merely supposed to be used as collateral when minting IRON. Any user in the system can issue IRON which is backed by their USDC and TITAN holdings. As crypto markets are quite crazy, it is not uncommon for a stablecoin to lose its peg. however, due to this possibility, every stablecoin needs a mechanism of protective covering for such fluctuations. In IRON ’ mho feel, their lone mechanism was assuming that arbitrage users would buy cheap IRON from the market when the price dips and therefore redeem it for USDC+TITAN and then sell TITAN for profit.

On June 16, 2021, the stabilization was working a intended until the price of TITAN started dropping and finally reached zero. At this same fourth dimension IRON lost its peg and dropped to around ~ $ 0.94, which is a massive spend for a stablecoin. In order to protect promote features, Iron.Finance had to pause both mint and redeem. In a recent report that dives into the details of TITAN and the habit of arbitrage, it describes that the delay ( 10min. Time weighted Average Price ) from the Price Feed Oracle for TITAN, caused the prices to be higher than those on an AMM ( very time automated market manufacturer ) as it couldn ’ triiodothyronine keep up. therefore, the price opening caused arbitraging to become unprofitable, and frankincense could not protect the stabilization. Iron.Finance published a autopsy on the incident, which failed to mention the lack of a stabilize mechanism. The DeFi Decentralized Finance ( DeFi ) removes fiscal institutions … More bank run resulted in Iron.Finance losing more than $ 2 billion in the sum respect locked ( TVL ) in the protocol, dropping from $ 2.18 billion locked to less than $ 10.5 million. For future developments for alike systems, there are a variety of scenarios to take into bill when properly testing your environment around price fluctuations, loss of pin, and tightening the time skeletal system between oracles or other mechanisms for determining prices .

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