Balance Coin Algorithm Stablecoin Severely Depegs, Plummets 99%
Balance Coin's price plummeted from approximately $0.9954 to $0.001358, suspected to be triggered by a security incident leading to depegging.
The incident is related to the governance DAO 42DAO, which suffered an attack of about $915,000. PeckShield and TenArmor detected suspicious activities related to GemJoin on the BNB Chain.
The vulnerability of the algorithmic stablecoin mechanism has been exposed, leading to rapid capital withdrawal from high-risk projects. Blockchain security service providers benefit, while DeFi users and similar protocols are under pressure.
Source: Public Information
ABAB AI Insight
Balance Protocol previously relied on an algorithmic mechanism to maintain its peg, similar to the collapse of Terra UST, which faced systemic failure due to governance attacks or arbitrage imbalances.
In terms of capital flow, attackers exploited DAO governance vulnerabilities to steal funds and trigger a bank run, leading to depleted remaining liquidity, making it difficult for the project team to recover quickly.
Similar to multiple historical events of algorithmic stablecoins, the DeFi stablecoin sector is currently transitioning from pure algorithmic models to over-collateralized hybrid models.
This fundamentally relates to regulatory changes and technological replacements, with governance attacks exposing decentralization weaknesses, pushing capital towards strictly audited and sufficiently collateralized stable assets.
ABAB News · Cognitive Law
Algorithmic stablecoins are prone to depegging, and governance vulnerabilities are fatal.
DAO attacks are swift, and bank runs are even faster, leading to instant liquidity depletion.
After security incidents, collateralized models outperform algorithmic mechanisms.