During yesterday’s real estate-backed USD stablecoin crisis, a trader appears to have exchanged 131,350 USDR for a $0 coin (USDC), resulting in a complete loss of the investment.
According to October 12 a report By blockchain analytics firm Lookonchain, the swap took place on the BNB chain through the decentralized exchange OpenOcean, at a time when the USDR was unpegged from the face value by approximately 50% due to the liquidity crunch. The Maximum Extractable Value (MEV) robot then detected the discrepancy, and made a total profit of $107,002 through the arbitrage trade.
During periods of poor liquidity, slippage on DEX exchanges can reach 100%. In September 2022, Cointelegraph reported that a trader attempted to sell $1.8 million in compounded US dollars (cUSDC) through the Uniswap DEX V2 and only received $500 worth of assets in return. MEV also, in this incident, conducted an arbitrage trade before realizing profits of over $1 million Hacked Only hours later.
On October 11, USDR was unpegged after users requested over 10 million stablecoins for redemptions. Despite being 100% backed, less than 15% of its $45 million in assets were backed by liquid project tokens TNGBL, with the remainder backed by illiquid real estate token assets.
As told by analyst Tom Wan, the token assets were minted according to the ERC-721 standard, which cannot be hashed to create liquidity for investors to redeem. In addition, primary homes cannot be sold immediately to satisfy withdrawal requests from investors. Altogether, the real US dollar treasury was unable to meet redemptions, leading to a collapse in investor confidence.
Why the USDR was de-pegged despite being fully backed: Using illiquid assets backing liquid assets
– USDR is 100% backed. 50% of it comes from stablecoins and the rest comes from real estate
– Tom Wan (@tomwanhh) October 12, 2023
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