Balance stablecoin collapses 99% after $1 million exploit drains its bitcoin vaults
An attacker fed the lending system a fake, abnormally low bitcoin price, liquidated vaults that should have been safe, and pocketed the difference in a single transaction.
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Balance stablecoin collapses 99% after $1 million exploit drains its bitcoin vaults
Tech
Balance stablecoin collapses 99% after $1 million exploit drains its bitcoin vaults
An attacker fed the lending system a fake, abnormally low bitcoin price, liquidated vaults that should have been safe, and pocketed the difference in a single transaction.
By
Shaurya Malwa
|
Edited by
Jamie Crawley
Jul 22, 2026, 9:01 a.m.
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Balance stablecoin collapses 99% after $1 million exploit drains its bitcoin vaults(Mika Baumeister/Unsplash)
Summary
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Balance Coin, an algorithmic stablecoin designed to hold a $1 peg, crashed more than 99% to about $0.0014 after an attacker exploited a pricing flaw in its protocol.
The attacker manipulated Balance Protocol’s bitcoin price oracle, triggering improper liquidations of collateralized vaults and netting about $912,000, largely at the expense of governance entity 42DAO.
The exploit comes amid heightened concern over DeFi security as increasingly capable AI systems raise new risks, including a recent controlled test in which OpenAI models compromised Hugging Face servers.
Balance Coin, a low-circulation algorithmic stablecoin meant to hold a dollar peg, crashed more than 99% on Wednesday after an attacker exploited a pricing flaw in the protocol behind it,
blockchain data
shows.
The token, which traded near its $1 peg a day earlier, fell to about $0.0014, erasing nearly all of its roughly $3.5 million in nominal value.
The attacker's actual profit was smaller, around $912,000, drained from 42DAO, the governance entity behind Balance Protocol. The project runs a system where users lock bitcoin-backed collateral to mint the stablecoin, and vaults are liquidated if the collateral's value drops too far.
Security firm
SlowMist said
the attacker manipulated the protocol's oracle - the external price feed it relies on - to write an abnormally low bitcoin price into the system.
How a fake bitcoin price drained a protocol in one transaction. (Shaurya Malwa/CoinDesk)
The lending contract then accepted that price without checking it against an accurate range and without any liquidation delay, letting the attacker instantly liquidate multiple vaults that should never have been eligible, then swap the seized collateral for profit.
The exploit lands amid growing scrutiny of DeFi security as AI systems grow more capable, including an instance from late Tuesday in which
OpenAI models broke out
of their own testing environment and compromised the servers of AI firm Hugging Face during a controlled evaluation.
Stablecoins
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Latest Research
TRON Network - Q2 2026
TRON Network - Q2 2026
In Q2; TRON's stablecoin dominance rose to 28.7%, USDT supply on TRON hit $89B ATH, $89M in protocol fees (2nd to Hyperliquid), TRX +3%, and deepening institutional & agentic reach.
By
CoinDesk Research
21 hours ago
Commissioned by
Tron
In Q2; TRON's stablecoin dominance rose to 28.7%, USDT supply on TRON hit $89B ATH, $89M in protocol fees (2nd to Hyperliquid), TRX +3%, and deepening institutional & agentic reach.
Why it matters
:
In Q2; TRON's stablecoin dominance rose to 28.7%, USDT supply on TRON hit $89B ATH, $89M in protocol fees (2nd to Hyperliquid), TRX +3%, and deepening institutional & agentic reach.
View Full Report
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Original YayaNews editorial coverage, published for informational purposes.
This article is sourced from CoinDesk. It is for informational purposes only and does not constitute investment advice.
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