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Thursday, October 6, 2022

Pricing Error For Luna Classic Causes Mirror Exploit

On Mirror Protocol, a decentralized finance platform (DeFI) for synthetic assets, a continuing exploit that can possibly exhaust all the funds of the platfome has been caused by an inconsistency in the reported price of the underlying assets. The exploit’s cause was made possible by a Luna Classic (LUNC) pricing error.

Mirroruser, a participant in governance, noticed the exploit on the protocol’s forum on Sunday. The synthetic asset pools on the protocol for Mirror Polkadot (mDOT), Mirror BTC (mBTC), Mirror Galaxy (mGLXY), and Mirror Ether (mETH), have almost their entire assets, totaling more than $2 million, lost as of the time of writing.

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On the layer-1 Terra CLassic and Terra blockchains, Ethereum, and the BNB Chain, Mirror enables the trading of synthetic assets like stocks and cryptocurrencies.

Error In Pricing Regarding Luna Classic

The exploit was made possible by a Luna Classic (LUNC) pricing error. Even though their real market prices differ greatly, according to CoinGecko, the remaining Terra Classic validators reported that the LUNC price was $0.000122, and was equivalent to the price of the recently launched (LUNA) Terra ($9.32).

The validators of Terra Classic were using an old and expired Oracle software version, according to ChainlinkGod, a community ambassador.

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When Chainlink, a price oracle, reported the price of LUNA constantly stayed $0.10 while the price of the market ran much lower, Venus Protocol and Blizz Finance both experienced an identical exploit issue in May. Blizz Finance was completely depleted, and Venus suffered an $11.2Mn loss.

FatMan, a Twitter user using the alias TerraCommunity, issued a warning that the other asset pools related to “m” will be affected by the Mirror exploit by Tuesday, 8:00 am UTC. But, the account furthermore asserted that if developers step in to fix the bug, most of these pools may still have a chance of being saved.

As the price confirmed by the oracle had returned to its true market value before 12:55 am UTC, the situation appeared that LUNC’s pricing error was no longer a mistake.

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