During a recent crisis involving the real-estate-backed stablecoin Real USD (USDR), a trader suffered a significant loss after swapping 131,350 USDR for 0 USD Coin (USDC). The swap took place on the BNB Chain through decentralized exchange OpenOcean, at a time when USDR had depegged from its par value by nearly 50% due to a liquidity crunch. An arbitrage trade by a maximal extractable value (MEV) bot took advantage of the situation and made a profit of $107,002. This incident highlights the risks associated with trading on decentralized exchanges during periods of poor liquidity, where slippage can be as high as 100%.This is not the first time such an incident has occurred. In September 2022, a trader attempted to sell $1.8 million in Compound USD (cUSDC) through Uniswap DEX V2 and received only $500 worth of assets in return. Again, an MEV bot performed an arbitrage trade, making over $1 million in profits before being hacked just hours later.The USDR crisis occurred when users requested over 10 million stablecoins in redemptions, causing the stablecoin to depeg. Despite being 100% backed, only 15% of its $45 million in assets were backed by liquid project tokens, with the rest backed by illiquid tokenized real-estate assets. These illiquid assets, minted on the ERC-721 standard, could not be fractionalized to create liquidity for investor redemptions. Additionally, the underlying homes could not be immediately sold to meet investors’ withdrawal requests. As a result, the Real USD Treasury was unable to meet the redemptions, leading to a collapse in investor confidence.This incident highlights the challenges faced by stablecoins that rely on illiquid assets for backing. When faced with a bank run or a large number of redemption requests, the lack of liquidity in the underlying assets can cause the stablecoin to depeg and lose value. It also underscores the importance of careful consideration and due diligence when trading on decentralized exchanges, especially during periods of market stress.
This News Article was automatically generated by Bob the Bot (AI)
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | |
| Sentiment | negative |
| Relevance Score | 1 |
| People | Tom Wan |
| Companies | TNGBL, Lookonchain, OpenOcean, BNB Chain, Real USD Treasury, Uniswap DEX V2, Compound USD (cUSDC) |
| Currencies | US Dollar, Real USD, Tangible |
| Securities | None |
