Balance Coin Crashes 99.8% After Oracle Failure Triggers $912K DeFi Exploit

• Balance Coin collapsed 99.8% as hackers exploited oracle vulnerabilities, draining $912,000 and destroying its dollar peg completely within seconds.
• Missing safeguards allowed manipulated Bitcoin prices to trigger discounted liquidations across major vaults, enabling profitable arbitrage transactions.
• Liquidity vanished when millions of newly minted BLC tokens flooded PancakeSwap, leaving 42DAO burdened with significant bad debt and unresolved liabilities.

 

Balance Coin (BLC) has lost its dollar peg after a hacker exploited vulnerabilities in the 42DAO protocol, wiping out 99.8% of the algorithmic stablecoin’s value. The exploit drained approximately $912,000 from the protocol and pushed BLC to around $0.0013 within a short period.

According to blockchain security firms PeckShield and SlowMist, the attacker completed the exploit in a single blockchain transaction by abusing weaknesses in the protocol’s oracle pricing and liquidation mechanisms. Their analysis showed that missing security checks allowed manipulated price data to trigger a rapid series of liquidations before the system could respond.

Additionally, the attacker sold millions of newly minted BLC tokens on PancakeSwap after securing the collateral, draining the available liquidity and accelerating the stablecoin’s collapse.

Also Read: Shiba Inu Just Triggered 7 Bullish Signals While Price Stays Under Pressure

Oracle pricing failure triggered rapid liquidations

According to PeckShield and SlowMist, the exploit began when the protocol’s Spotter contract accepted an incorrect Bitcoin price from the BTCB oracle. Instead of rejecting the abnormal value, the contract updated the system because it lacked filters designed to detect extreme price deviations.

Moreover, the pricing module did not include safeguards limiting how far an asset’s value could decline within a single update. As a result, the manipulated Bitcoin price immediately flowed into the protocol’s liquidation system.

The false price reached the Dog contract, which manages liquidations across the platform, and because the protocol lacked a liquidation delay, it acted on the manipulated data without additional verification.

Consequently, several large Bitcoin-backed vaults were liquidated at heavily discounted prices, allowing the attacker to acquire the collateral below market value before profiting through arbitrage.

Liquidity collapse deepened the protocol’s losses

After completing the liquidations, the attacker dumped millions of newly generated BLC tokens on PancakeSwap. That selling pressure quickly exhausted the remaining liquidity, sending the stablecoin’s value close to zero.

Furthermore, the exploit left 42DAO with substantial bad debt while exposing weaknesses in its risk management framework. Researchers noted that the protocol adopted a common DeFi architecture but failed to preserve the oracle protection mechanisms that help prevent manipulated price feeds from triggering liquidations.

The Balance Coin collapse highlights the importance of strong oracle safeguards in decentralized finance. Meanwhile, the 42DAO team has not announced a recovery strategy or compensation plan for affected users.

Also Read: Here’s Why New S&P Crypto Index Excluded BTC and XRP

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