Deadly cyberattack in the crypto market: The coin lost 99% of its value in hours
Balance Coin lost almost all of its value after an attacker exploited two loopholes in the protocol. The event highlights the risks in the DeFi world and the challenges accompanying algorithmic stablecoins.
The algorithmic cryptocurrency Balance Coin (BLC), operating on the BNB Chain network, recorded an abnormal collapse after losing about 99% of its value within a few hours. The coin's price plummeted from one dollar to approximately 0.0007 dollars, following a sophisticated cyberattack that exploited weaknesses in the project's operational mechanism. This attack joins a series of cyberattacks carried out over the last month.
According to the published details, the attacker carried out the attack in two stages. First, they exploited a failure in the oracle mechanism, which is responsible for feeding asset prices into the blockchain. By feeding an incorrect and extremely low price for the Bitcoin token, the attacker managed to make the protocol think that certain assets had lost their collateral. As a result, automatic liquidations were executed, during which assets worth about 915 thousand dollars were stolen.
Subsequently, the attacker exploited another loophole, which allowed them to mint about 4.5 million new BLC coins without any collateral. The coins were immediately sold on the decentralized exchange PancakeSwap, which created massive selling pressure, drained liquidity, and led to the coin's price collapsing to almost zero within a short time.
Beyond the financial loss, the incident illustrates a broader problem in the world of decentralized finance (DeFi). Security experts warn that many protocols still rely on automated code without protection mechanisms that can stop abnormal activity in real-time. Unlike traditional financial markets, where trading can be halted in extreme cases, in smart contracts, operations are executed automatically, even when the data entered into the system is incorrect.
The incident also brings back to the center stage the challenges of algorithmic stablecoins, which are designed to maintain a fixed value without full backing in fiat currencies. Since the collapse of Terra Luna in 2022, the industry has been trying to develop more stable and secure models, but the case of Balance Coin illustrates how even a small weakness in the code or pricing mechanism can lead to a rapid collapse of the project and severe harm to investors.
