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FollowingBalance Coin was attacked due to a 42DAO oracle vulnerability, and its price plunged 99%
An attacker used 42DAO oracle and clearing system vulnerabilities on the BNB Chain to steal approximately $915,000 from the protocol. Balance Coin (BLC) prices plunged more than 99%.
Security agency PeckShield estimated the damage at close to $915,000. BLC fell to an intraday low of $0.001209 on Wednesday from about $0.995, before trading back to about $0.0025, but still more than 99% below its anchor rate for the dollar.
The attacker took advantage of the abnormally low BTCB price offered by 42DAO's Median Oracle. The protocol's Spotter contract accepts this price through its poke function without setting any limits on price deviations, maximum retractions or minimum allowed values. After the price was written into the agreement's accounting system, the Dog contract's bark function immediately initiated clearing of multiple BTCB collateralized vaults. The clearing system lacks a delay mechanism and does not independently verify oracle updates before processing positions.
The attacker forged BLC and cashed in through PancakeSwap
Two suspicious BNB Chain transactions were discovered on 42DAO and GemJoin related addresses. One of the larger transactions minted approximately 4.5 million BLC's, which were subsequently routed to the liquidity pool of PancakeSwap V2.
After manipulating the liquidation resulting in an under-collateralized position in the agreement, the attacker converted the newly minted BLC into BSC-USD and BTCB. About two hours later, the second transaction minted another 5900 BLC and withdrew more assets through remaining liquidity.
Balance Coin is the core stablecoin of the Balance Protocol ecosystem. It is designed to use mortgage vaults, oracle prices and clearing mechanisms to maintain its anchor with the US dollar, while the buffer pool owned by the agreement collects clearing penalties and holds the USDT.
The attack occurred after the Ostium oracle was used and resulted in US$18 million in damage. In that incident, manipulated price reports generated false trading profits against a USDC vault.
Liquidity disappears after the BLC is unanchored
BLC was priced close to the US$1 target price at the beginning of the attack, and then unauthorized supply poured into the decentralized trading pool. The rapid sell-off drained most of the available pairing liquidity of the token and pushed its price to less than a cent.
A similar supply shock caused TesseraDAO's TSR token to plummet 99% in June. At the time, an attacker minted 99 million tokens and sold them for approximately $2.4 million through BNB Chain liquidity.
As of the publication of this article, the 42DAO has not released an official response, technical post-mortem analysis, recovery plan, or instructions for BLC holders. Its website still describes BLC as a stable asset that supports the broader 42DAO ecosystem.
