Global fintech and funding innovation ecosystem

Thursday’s Market Madness Strained Ethereum’s Killer App: DeFi

Coindesk | William Foxley | March 13, 2020

strained - Thursday’s Market Madness Strained Ethereum’s Killer App: DeFiSo many people were trying to use the Ethereum blockchain during Thursday’s market meltdown that many applications simply stopped working as intended.

The decentralized finance (DeFi) sector was hit particularly hard.

The decentralized services that feed price information into these headless lending platforms – known as “oracles” in the industry – simply couldn’t keep up.

Oracles could not send accurate price data and traders could not execute trades without paying horrendous fees to record transactions onto the blockchain.

See:  Why DeFi’s Billion-Dollar Milestone Matters

In a throwback to 2017, the Ethereum network became too crowded to execute transactions for many projects. In 2017, it was NFT gaming app CryptoKitties that overloaded Ethereum by issuing too many transactions during a bull market. At one point, 30,000 transactions were stuck in the queue waiting to be processed by the network.

Thursday’s mass transaction action was caused by the precarious plummet of ether’s price, which shed 30 percent in 24 hours in a network first.

Pricing oracles – typically Chainlink or Maker’s V2 oracle – were the main victims Thursday.

Several of Chainlink’s 21 oracles were down during prime trading hours, according to bZx co-founder and CEO Tom Bean.

Stani Kulechov, founder and CEO of DeFi platform Aave, said he saw a Maker oracle throw a “20 percent price deviation” between the actual market price and Maker’s generated feed.

Oracles query data from on- or off-chain sources. Contracts pulling from on-chain sources had their requests crowded out by other transactions on the ethereum network, leading to oracle failures for both V2 and Chainlink.

Orders were also backlogged on the Ethereum mainnet and traders were forced to pay outlandish gas fees to settle.

For example, users were not able to perform trades on exchange dYdX or lending platform Nuo Network. Both DeFi platforms changed their fee structures (including dYdX multiple times) to execute a slew of backlogged trades Thursday and early Friday.

“The network condition is affecting everyone,” Aave’s Kulechov said. “People need to just pay the 160 gwei [gas fee] to keep prices up to date.”

MakerDAO was undoubtedly the biggest loser on Thursday. An infrastructure error led to over $4 million being swooped up by a lurking bot-maker, leaving investors high and dry as their collateral was taken away. In response, the Maker community voted Friday to restructure certain risk measures.

See:  Lock BTC, Get DAI: Lending Firm Bridges Bitcoin-DeFi Divide in Latin America

DeFi exchange bZx also halted opening new trades and loans and will leave these features offline until an audit is conducted, said Bean. bZx recently switched to Chainlink following a flash loan attack that relied on manipulated pricing data. All Chainlink oracles are reporting as of press time.

“The issue is that data providers can’t provide timely updates. I can query the current rate, but it’s way off from [the] actual market rate,” Bean said.

Continue to the full article --> here


NCFA Jan 2018 resize - Thursday’s Market Madness Strained Ethereum’s Killer App: DeFi The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit:

Latest news - Thursday’s Market Madness Strained Ethereum’s Killer App: DeFiFF Logo 400 v3 - Thursday’s Market Madness Strained Ethereum’s Killer App: DeFicommunity social impact - Thursday’s Market Madness Strained Ethereum’s Killer App: DeFi

Support NCFA by Following us on Twitter!

NCFA Sign up for our newsletter - Thursday’s Market Madness Strained Ethereum’s Killer App: DeFi


Leave a Reply

Your email address will not be published. Required fields are marked *

fourteen + 4 =