Balance Coin (BLC) has lost almost all of its value. The algorithmic stablecoin on BNB Chain, originally designed to track the US dollar, plunged more than 99%. The price collapse of BLC was triggered by reported exploits on 42DAO, the governance entity of Balance Protocol. Based on market movements, the price of BLC crashed from $0.9954 to $0.001358 in a very short time.
Blockchain analytics firm PeckShield estimated total losses from the incident at $915,000. Balance Protocol itself, through statements in its Gitbook documentation, noted that BLC was primarily backed by Bitcoin Cash reserves. Now, all of those price defenses have been breached following a well-planned attack.
How the Oracle Vulnerability Was Exploited
The SlowMist team dissected the attack vector used to breach 42DAO’s defenses. The root cause lay in the price manipulation of the Binance Bitcoin (BTCB) oracle. The attacker pushed the system’s BTCB price to an unnaturally low level.
This artificial drop triggered a cascading domino effect. The system was forced to liquidate numerous user BTCB vaults, even though these asset pools should not have been liquidated under normal market conditions.
“A combination in a single transaction exploited the lack of price protection and liquidation delay in a Maker-style system,” SlowMist stated in its analysis.
Minting Money Out of Thin Air
Findings from TenArmor further clarified the path of the stolen funds on BNB Chain. They detected two suspicious transactions. In the first move, the attacker freely minted approximately 4.5 million BLC tokens from a null address.
These millions of tokens created out of nothing were immediately dumped onto the market. The attacker moved the 4.5 million new BLC to PancakeSwap V2 to swap them for BSC-USD and BTCB. This artificial minting immediately drained real liquidity from the decentralized exchange.
The attacker was not done yet. About two hours later, a second transaction was executed. The hacker minted an additional 5,900 BLC using the exact same exploit method as the previous wave.
Similar Attack Patterns
The collapse of Balance Coin is not an isolated case of unauthorized token minting. A similar incident hit Resolv USR last March. In May, the MAPO token also fell 96% due to a similar exploit, alongside an attack targeting Stake DAO via a vulnerability in vsdCRV.
Oracle manipulation vulnerabilities remain a fatal threat to decentralized finance projects. As long as robust price protections are not built in, external actors will continue to exploit them and force systems to operate beyond their intended boundaries.
Reported by Cointelegraph.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
