Vladislav Sopov
Mycelial liquidity pool exploited by an arbitrage bot abusing the price variance problem
contents
- Mycelial ETH/USD pool exploited
- Net TVL decreased by 4-6%
Mycelium, a multi-product Web3 ecosystem, announced that one of its liquidity pools has suffered losses due to price feed issues. Also, the IP address of the protocol was blocked by the Binance API module.
Mycelial ETH/USD pool exploited
According to a statement from Mycelium’s team, today, January 7, 2023, the platform suffered from an exploit by an arbitrage bot. The bot discovered a discrepancy in Ether (ETH) price on the platform (spread too high) and started abusing it with a large amount of liquidity.
The team wants to address the situation surrounding the ETH-USD price feed that impacted MLP.
Apparently one of the three data providers encountered a problem overnight. While another data provider was down due to IP blocking. Causes a discrepancy in the median price.
1/7
— Mycelium (@mycelium_xyz) January 7, 2023
The discrepancy should be attributed to the Bitfinex API, which started sending out highly volatile prices for the ETH/USDT pair around 02:45 AEST. Meanwhile, the other price feed provider, Binance, was down as it blocked the US-connected IP used by Mycelium.
As a result, the system was unable to rebalance the price using an independent price feed. Mycelium only used data from Bitfinex and Coinbase as a result of the Binance outage, which “was not widely communicated,” the Mycelium team points out.
Once the problem was identified, the team launched an internal investigation and halted trading. The pool was unavailable for a total of 2.5 hours, the autopsy said.
Net TVL decreased by 4-6%
Mycelium experts revealed that the problems “resulted in between 4 and 6% deterioration in MLP.” As the 24-hour trading volume for this pool exceeded the equivalent of $218 million, the losses could be severe.
The protocol decided to introduce stronger monitoring of feeds, improved alerts and faster communication to prevent such incidents from happening again.
As reported by U.Today, Balancer (BAL) DeFi yesterday asked its users to withdraw funds from five pools on four blockchains.
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