The Coin Rise 2025-05-30 18:22:13

Chainlink Oracle Glitch Spark Massive Liquidations, Raises Concerns

On May 29, a small error in Chainlink’s price oracle led to big problems in the decentralized finance (DeFi). As revealed , this glitch caused more than $500,000 worth of trades to be forcibly closed on Avalanche’s Euler Finance platform. This event made people worry about how much DeFi projects can trust oracles. Oracles are systems that give price data to smart contracts. How a Small Price Error Triggered Major Losses Chainlink’s price oracle for deUSD, a stablecoin issued by Elixir and backed by real-world assets, showed an incorrect value of $1.03 instead of $1.00. Although this may seem small, it had a big impact. Traders using deUSD as collateral on the Euler Finance lending protocol on Avalanche faced forced liquidations due to the sudden price change. deUSD has a total supply of $185 million, with about $42.7 million circulating on Avalanche. The coin is popular because it offers high returns and is often used for borrowing up to 10 times more than the original amount. This made sudden price changes costly for many users. Notably, Chainlink’s oracle provides price data to DeFi platforms. In this case, Chainlink’s oracle used a volume-weighted average price (VWAP) method to reflect a temporary price spike in a Curve liquidity pool. This spike briefly caused the price to rise above $1, and Chainlink’s feed recorded this higher price. While the data accurately reported the pool’s value, unexpected liquidations occurred on Euler Finance. Expert Criticizes Chainlink’s Oracle Design Some experts have shown backlash against Chainlink’s oracle system after the incident. Omer Goldberg, founder of Chaos Labs, criticized Chainlink for delaying a critical price update by 25 minutes. He said Chainlink’s price feed depends too much on outside sources like CoinGecko, which he thinks is not good for stablecoins. Goldberg warned that using average prices in pools with low trading makes systems easy to manipulate. In April, hackers exploited a weakness in KiloEX’s price oracle system . These events spotlight the challenges decentralized systems face. Chainlink Says Responsibility Lies With Protocols, Not Just Oracles In response to the criticism, Chainlink’s Community Liaison, Zack Rynes, said the oracle showed the market data correctly. He explained that each protocol needs to apply filters or checks to the raw data provided by Chainlink. Rynes explained that the price spike happened because of heavy trading in one liquidity pool, pushing the average price just above $1. Marc Zeller from Aave Chan Initiative also shared his view in an X post. He said the main problem was treating risky or low-trade assets like stable and safe ones. He warned that shortcuts to lower risk can hide real dangers and hurt users. He added that this shows that oracles only give data. It is up to DeFi platforms to manage risk and keep users safe. The post Chainlink Oracle Glitch Spark Massive Liquidations, Raises Concerns appeared first on TheCoinrise.com .