Scream, a Fantom-based Defi lending protocol, has sustained $35 million in bad debt after neglecting to change the prices of two stablecoins that dropped their US dollar peg – Fantom USD (fUSD) and DEI.
The stablecoins were listed for $1 on the Scream protocol, while in fact, they were trading far below a dollar price. The fUSD fell as low as $0.69, while the DEI on the other hand fell as low as $0.52.
To what was viewed as Whales taking the head of the circumstances, they deposited large amounts of FUSD and DEI at a reduced rate and drained the Scream system of all other stablecoins. Fantom USDT, FRAX, DAI, MIM, and USDC are among the stablecoins that have been embezzled off the platform. As a result, users who have purportedly deposited these stablecoins cannot withdraw from Scream.
What affected the Defi lending protocol
The circumstances with fUSD were adversely affected further by the fact that the stablecoin’s deposit maximum was set to infinity rather than zero. This situation, combined with the FUSD becoming depegged, allowed people to borrow vast amounts of money against the bad debt and exhaust the protocol’s surviving stablecoins.
DeFiLlama says that the Defi lending protocol has also lost roughly half of the total value plugged in its smart contracts.
Scream reacted to the problem by announcing that it was working with the Fantom Foundation to come up with a solution to the bad debt. This workable solution entails liquidating all fUSD loans that are presently underwater.
For the DEI situation, the primary lenders of DEI have agreed to repay back all debts borrowed out.
We will solely be relying on Chainlink Oracles to ensure optimal health of the protocol going forward. This will be our policy moving forward.
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(@Screamdotsh) May 16, 2022
In the meantime, Deus Finance DAO has suggested selling treasury bonds to reestablish DEI’s peg reliability. The proposal suggests the platform will provide users with treasury bonds in exchange for USDC, DAI, and FRAX collateral.
DEI and FUSD are the most recent stablecoins to lose their ties to the US dollar. TerraUSD (UST) initiated the trend last week with a precipitous drop that resulted in the demise of Luna (LUNA).
Source: https://www.cryptopolitan.com/defi-lender-35-million-bad-debt/