- The IP address of the protocol was blacklisted by the Binance API component.
- The Bitfinex API began publishing very fluctuating prices for the ETH/USDT pair.
Mycelium, a Web3 ecosystem comprised of many products, recently revealed that price feed problems had caused losses in one of its liquidity pools. Additionally, the IP address of the protocol was blacklisted by the Binance API component.
Team members from Mycelium issued a statement on January 7th, 2023, saying that an arbitrage bot exploited the platform. The bot saw an inconsistency in the ETH price on the exchange (too wide spread), so it began flooding the market with unnecessary funds.
No External Price Feed to Restore Equilibrium
As of about 2:45 AM AEST. The Bitfinex API began publishing very fluctuating prices for the ETH/USDT pair, which is the likely cause of the disparity. At the same time, Binance, the other price feed supplier, was unavailable. Because it had restricted the U.S.-based IP address used by Mycelium.
That meant there was no external price feed the system could use to restore equilibrium. Due to the Binance downtime that “was not widely communicated,” the Mycelium team emphasizes that they solely used data from Bitfinex and Coinbase.
When the issue was discovered, the group immediately suspended trade and began an internal inquiry. According to the investigation into the incident, the pool was closed for a total of 2.5 hours.
In-depth analysis of the mycelium revealed that the problems “led to degradation of MLP of somewhere between 4-6%.” This pool’s 24-hour trading volume was more than $218 million equivalent, thus losses might be high. To ensure that such events don’t occur again, the protocol decided to incorporate stricter feed monitoring, improved alarms, and quicker communication.
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