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dYdX Founder Calls Foul Play In $9 Million Insurance Fund Loss

Press Releases Crypto News Bitcoinist dYdX Founder Calls Foul Play In $9 Million Insurance Fund Loss

Decentralized exchange (DEX) dYdX has had to take out millions from its insurance fund to cover user liquidations on its platform, according to a recent announcement. This action was forced by the recent liquidations in the Yearn.Finance (YFI) market.

What Led To The $9 Million Insurance Fund Withdrawal?

On Saturday, November 18, the Yearn.Finance’s governance token (YFI) witnessed a drastic 43% decline in value, leading to a wipeout of $50 million in YFI Open Interest.

Consequently, this dramatic drop in price triggered a moment of fear, uncertainty, and doubt (FUD) within the crypto community, with some members speculating on the possibility of an exit scam.

In a post on the X (formerly Twitter) platform, the team behind dYdX disclosed that about $9 million from the platform’s v3 insurance fund was used to fill gaps in liquidations processed in the YFI market.

Last night about $9m from the dYdX v3 insurance fund were used to fill gaps on liquidations processed in the YFI market. The v3 insurance fund remains well funded with $13.5m in funds remaining

No user funds were affected and our team is working to investigate the event

— dYdX (@dYdX) November 18, 2023

According to the decentralized exchange’s website, the insurance fund is “the first backstop to maintain the solvency of the system when an account has a negative balance.” The fund is not decentralized, meaning that the protocol’s team is directly responsible for deposits to and withdrawals from it.

In the announcement, the protocol’s team also clarified that the insurance reserve still remains “well-funded” with $13.5 million left. However, this only means that the protocol was forced to par

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Author: Opeyemi Sule

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