DeFi protocol Iron Finance suffered a massive impact to their TITAN token in what they described as a “bank run,” and what many in the Cryptoverse called a rug pull – but inadvertently providing an important warning for algorithmic stablecoins, with Dallas Mavericks owner Mark Cuban finding himself among the victims too.
IRON Titanium Token (TITAN) has suffered an almost 100% loss in a single day – going from its all-time high of USD 64.19 on June 16 to almost USD 0 on June 17. “Almost” means that the price reached USD 0.000000049491.
“Dear community, please withdraw liquidity from all pools,” said Iron Finance earlier today, promising to share a post-mortem “as soon as we have a better understanding of this bank run.” Per this initial post, USD Coin (USDC) collateral was available for redemption.
According to the comments that followed, the request wasn’t in regards to TITAN, but IRON, “a multi-chain partial-collaterized stablecoin” available on Polygon (MATIC) and the Binance Smart Chain (BSC), per the website. This collateral consists of two tokens: TITAN and Polygon-based USDC, as well as STEEL and binance USD (BUSD) on BSC.
In the second post, the team explained that since the price of TITAN dropped to 0, the contract does not allow redemptions. Twelve hours of timelock will need to pass before USDC redemptions are once again enabled.
At 7:50 UTC, IRON is trading at USD 0.68, after it dropped 32% in the past day. STEEL is also down 69% in a day, now changing hands at USD 0.56.
Cryptonews.com has reached out to Iron Finance for comment.
All this suggests that algorithmic stablecoins – those that “aim to maintain a stable price by automatically adapting the stablecoin supply to meet demand,” as Gyroscope Protocol‘s Ariah Klages-Mundt wrote – come with risks of their own.
In regards to Iron Finance, Klages-Mundt, who is an applied math PhD student at Cornell University, argued that “the bank run is self-reinforcing with the price collapse of the Titan token that implicitly backs the algorithmic portion.”
Iron, an under-collateralized-by-design stablecoin, is experiencing a bank run on its algorithmic/Titan portion, si… https://t.co/ojKrb3bPyf
Per Anderson Kill Partner Preston Byrne, this incident “has to do with the fact that all algo stablecoins are, economically speaking, total bullshit. […] Algo stablecoins have been tried for years and years and they always blow up.”
“I got hit like everyone else,” Cuban confirmed. “Crazy part is I got out, thought they were increasing their TVL [total value locked] enough. [Then] Bam.”
Earlier this week, he said that “crypto Businesses make more sense than you think and valuing tokens is easier and makes more sense than you think.”
He then explained that he was “a small” liquidity provider for the decentralized exchange QuickSwap, providing two different tokens: DAI and, you guessed it, TITAN.
“But the cool thing is while I don’t get any extra rewards for this pair (you reading this Titan and Quickswap ???), I am currently the only [liquidity provider] in this pool, so I get 100pct of the fees. In every pool, the LPs, get a percentage of the fees based on the percentage of the liquidity they provide,” he wrote.
“Valuing tokens is easier and makes more sense than you think” – Mark Cuban, two days before suffering a 99.9% loss. https://t.co/O1Lf31arnj
Mark I’m telling you the way you are rolling up your sleeves, no bs and getting in the weeds is the way to go with anything in life.
Doing that in DeFi gets you battle scars, exponential knowledge and respect from the community.
These are stories we’ll laugh about soon
— Spadaboom (@spadaboom1) June 16, 2021
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