Key Takeaways
- Decentralized exchange dYdX is considering compensating affected traders up to $462,000 from its insurance fund following an October 10 outage.
- The outage, caused by a misordered code process and validator delays, led to incorrect trade and liquidation prices for several hours.
- Despite no on-chain fund loss, some traders incurred significant losses due to liquidations during the downtime.
- Binance also addressed post-crash issues with a $728 million support initiative for affected investors.
dYdX Considers Trader Compensation After Outage
Decentralized derivatives exchange dYdX announced on Monday, October 27, that its governance community will vote on whether to compensate affected traders up to $462,000 from the protocol’s insurance fund.
This proposal follows an outage on October 10, which was attributed by dYdX to a “misordered code process” during a deployment. The incident halted the dYdX Chain for approximately eight hours. The duration of the downtime was compounded by delays from validators in restarting their oracle sidecar services, resulting in stale price data upon the network’s restoration.
Chain Halt Disrupts dYdX Operations
dYdX, a decentralized exchange, shared a comprehensive report and update detailing its intention to support traders negatively impacted by a chain halt. The incident paused operations for several hours during a significant market downturn. While no on-chain funds were lost, the technical glitch caused dYdX’s matching engine to execute trades and liquidations at erroneous prices, leading to unexpected losses for some traders.
Notably, the eight-hour outage coincided with one of the largest liquidation events in cryptocurrency history. This disruption prompted dYdX to suggest that the community consider reimbursements from the protocol’s insurance fund.
The exchange explained that upon the chain’s reactivation, the matching engine processed trades and liquidations using outdated oracle data, resulting in incorrect pricing.
Despite dYdX confirming that no user funds were lost on-chain, several traders experienced substantial losses related to liquidations while the system was offline.
The dYdX governance community is now slated to vote on whether to approve compensation for the impacted traders from the protocol’s insurance fund. This situation arose in the wake of a broader crypto market crash that saw approximately $19 billion in positions liquidated, marking it as the largest liquidation event in crypto history.
Separately, Binance also faced challenges during this period, experiencing significant price volatility, user concerns, and regulatory scrutiny. Traders expressed frustration with Binance due to technical issues that hindered their ability to close positions. These issues included interface problems displaying prices below zero for multiple tokens and depegging events associated with Ethena’s USDe synthetic stablecoin.
Binance Allocates Funds for Affected Investors
In response to the market volatility and subsequent issues, sources indicated that Binance did not initially accept responsibility for trader losses. However, the cryptocurrency exchange subsequently launched a support initiative valued at $400 million for those affected by the downturn.
This initiative includes $300 million in token vouchers and an additional $100 million dedicated to participants impacted within the sector.
Regarding the token vouchers, eligible users were designated to receive vouchers ranging from $4 to $6,000. To qualify, Binance established specific criteria, requiring traders to have experienced forced liquidations on their futures or margin positions between Friday, 00:00 UTC, and Saturday, 23:59 UTC. Additionally, users needed to have incurred a crypto loss of at least $50, with these losses constituting at least 30% of their total net worth.
Furthermore, to support memecoin traders who suffered losses during the market crash, Binance introduced a $45 million BNB token airdrop aimed at bolstering market confidence.
Collectively, the exchange pledged $728 million to assist traders affected by the sell-off. Despite this commitment, Binance maintained that it is not liable for individual user losses.
Expert Summary
dYdX is proposing compensation of up to $462,000 from its insurance fund for traders impacted by an eight-hour outage on October 10. The outage, caused by a code deployment error, led to incorrect trade executions and liquidations. In a separate development, Binance launched a $728 million support package, including token vouchers and airdrops, for investors affected by recent market volatility, while stating it is not responsible for user losses.