decrypt.co
Cryptocurrency traders are continuing to face fallout from the Terra blockchain crash.
Now that Terra 2.0 has launched—with the old LUNA cryptocurrency renamed to Luna Classic, or LUNC—the new LUNA token on the Terra blockchain was trading at $8.51 as of this writing, while LUNC was trading at $0.0001.
This substantial price discrepancy enabled an exploit yesterday in which an attacker reportedly drained more than $2 million from Mirror Protocol.
Mirror Protocol is a Terra DeFi project with an Ethereum token MIR, which is down more than 9% over the last 24 hours. On Mirror, users can trade synthetic versions of real equities, like shares of Amazon or Apple.
But an issue with Terra Classic validators caused a mixup in the oracle’s price reporting of LUNC, listing LUNC’s price as LUNA’s.
.@mirror_protocol has just been exploited again due to Terra Classic validators reporting the price of the new Terra 2.0 $LUNA coin (~$9.80) instead of the original Terra Classic $LUNC coin (~$0.0001)
This is a massive operations failurehttps://t.co/hO0M0UFBYq https://t.co/ygbr3ij4iS pic.twitter.com/PO0huxX8oQ
— ChainLinkGod.eth (@ChainLinkGod) May 30, 2022
The error reportedly occurred because many Terra Classic validators weren’t running an updated version of the price oracle.
This is because a majority of the #TerraClassic #LUNC validators are running an outdated version of the price oracle! You can see who is publishing bad prices here https://t.co/cKM9V1VbPh if they have a low missed-oracle vote count they need to update ASAP!!! https://t.co/h5GBrg3UGe
— Todd G | block pane (@blockpane) May 30, 2022
In short, that stark price difference enabled the attacker to use the inflated crypto to mint synthetic assets and then sell them for UST and USDC. As one user explained on Discord, the exploit caused some of Mirror’s assets to plummet.
Early Tuesday morning, FatManTerra reported that Mirror had disabled the use of mBTC, mETH, mGLXY, and mDOT as collateral to prevent further liquidity from being drained.
As Mirror struggles to restabilize, an ambassador for Chainlink argued that the exploit could have been avoided, writing on Twitter: “This issue was 100% preventable as soon as the decision was made to rebrand $LUNA to $LUNC though proper coordination and management of the oracles.”
The Mirror Protocol team did not immediately respond to requests for comment from Decrypt.