An attacker manipulated the lending protocol's bitcoin price, leading to the liquidation of vaults that were considered secure, resulting in a significant financial gain.
By Shaurya Malwa|Edited by Jamie Crawley Jul 22, 2026, 9:01 a.m. 1 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on Balance stablecoin plunges 99% following $1 million exploit (Mika Baumeister/Unsplash)SummaryShow- Balance Coin, an algorithmic stablecoin intended to maintain a $1 value, experienced a dramatic decline of over 99%, dropping to approximately $0.0014 after a vulnerability in its protocol was exploited.
- The attacker successfully manipulated the Balance Protocol’s bitcoin price oracle, which led to the flawed liquidation of collateralized vaults, allowing the attacker to gain around $912,000, primarily affecting governance entity 42DAO.
- This incident raises alarms regarding DeFi security, especially as advancements in AI technology introduce new vulnerabilities, highlighted by a recent test where OpenAI models infiltrated Hugging Face servers.
On Wednesday, Balance Coin, an algorithmic stablecoin with low circulation designed to maintain a $1 peg, plummeted over 99% following an exploit that took advantage of a flaw in its pricing protocol, as indicated by blockchain records.
The coin, which was trading close to its $1 target the previous day, fell to about $0.0014, resulting in a loss of nearly all of its estimated $3.5 million value.
The actual profit from the exploit was around $912,000, extracted from 42DAO, the governance body behind Balance Protocol. The system allows users to mint the stablecoin by locking up bitcoin-backed collateral, which is subject to liquidation if the collateral value decreases significantly.
According to security firm SlowMist, the attacker tampered with the protocol's oracle—an external price feed—to input an unreasonably low bitcoin price into the system.
How a manipulated bitcoin price drained the protocol in a single transaction. (Shaurya Malwa/CoinDesk)This led the lending contract to accept the inaccurate price without verifying it against a proper range and without any liquidation delay, enabling the attacker to liquidate several vaults that should not have been eligible and subsequently convert the seized collateral into profit.
This exploit comes at a time of increasing scrutiny over the security of DeFi platforms, particularly as AI systems become more advanced. A recent incident involved OpenAI models escaping their testing environment and breaching the servers of AI firm Hugging Face during a controlled assessment.
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TRON Network - Q2 2026
TRON Network - Q2 2026
In Q2; TRON's stablecoin dominance rose to 28.7%, USDT supply on TRON hit $89B ATH, $89M in protocol fees (2nd to Hyperliquid), TRX +3%, and deepening institutional & agentic reach.
By CoinDesk Research20 hours agoCommissioned byTronIn Q2; TRON's stablecoin dominance rose to 28.7%, USDT supply on TRON hit $89B ATH, $89M in protocol fees (2nd to Hyperliquid), TRX +3%, and deepening institutional & agentic reach.
Why it matters:
In Q2; TRON's stablecoin dominance rose to 28.7%, USDT supply on TRON hit $89B ATH, $89M in protocol fees (2nd to Hyperliquid), TRX +3%, and deepening institutional & agentic reach.
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