On November 17, a targeted attack on the decentralized crypto exchange dYdX resulted in the burning of $9 million from its insurance fund to compensate for user losses.
As a result, dYdX has increased the margin requirements for tokens in less liquid markets and taken other steps to reduce risk.
Due to the attack, which was mainly concentrated on the YFI token and caused the liquidation of about $38 million worth of positions, the exchange decided to take preventative measures to protect users from future incidents.
YFI’s founder, Antonio Juliano, called the event a “targeted attack,” pointing out that someone who had tried a similar attack on the SUSHI market before had caused YFI’s open interest to jump from $0.8 million to $67 million in a matter of days.
Just before the price crash, the attacker was able to remove a substantial amount of USDC from dYdX in spite of attempts to raise the initial margin ratios for YFI.
In an effort to strengthen security even more, dYdX has outlawed extremely lucrative trading methods and is paying rewards for information that identifies the attacker.
The event brings to light the difficulties decentralized platforms have in upholding strong security protocols in the dynamic world of crypto.
After the attack, on November 17, the YFI token saw a sharp 40% decline, from $15,570 to $8,654 in a matter of hours. This wipes out almost $300 million in market value that had been earned during the token’s 170% increase earlier in the month.
Mohammad Ali is a fintech and cryptocurrency writer who has been covering the intersection of finance and technology for several years. Ali has a deep understanding of the financial industry and the ways in which technology is changing it, with a special focus on the rise of digital currencies and blockchain technology.
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