Balance Coin Loses Its Dollar Peg
The crypto market saw another major stablecoin collapse after Balance Coin (BLC) lost more than 99% of its value following a suspected exploit involving 42DAO and GemJoin on BNB Chain.
Balance Coin is an algorithmic stablecoin that is designed to maintain a value of approximately $1. However, the token fell from close to its intended dollar peg to an all-time low of $0.001209 on July 22.
Balance Coin price (Source: Crypto.com)
Blockchain security firm PeckShield estimated that approximately $915,000 was lost during the suspected attack.
Security Firms Identify Suspicious BLC Minting
TenArmor reported detecting two suspicious transactions connected to GemJoin and 42DAO, which is the decentralized organization associated with the Balance Protocol ecosystem.
According to on-chain activity, the first transaction created approximately 4.5 million BLC tokens from a null address. The newly minted tokens were then transferred to PancakeSwap V2, where they were exchanged for Binance-pegged USDT, also known as BSC-USD, and Binance Bitcoin (BTCB).
A second transaction reportedly occurred around two hours later. The attacker allegedly used the same method to mint an additional 5,900 BLC before extracting more assets from the available decentralized exchange liquidity.
The unauthorized minting greatly increased the number of BLC tokens available for sale. As the newly created tokens entered trading pools, the additional selling pressure pushed the stablecoin far below its intended $1 value.
A detailed post-incident report from 42DAO has not been made public yet. As a result of this, the exact technical weakness and full extent of the damage is still unclear.
Unauthorized Minting Remains a Crypto Market Risk
The Balance Coin collapse is the just latest example of unauthorized token creation causing heavy losses in the crypto market. In May, MAPO reportedly fell 96% after attackers exploited a bridge vulnerability to create unauthorized tokens and sell them through decentralized exchanges.
Stake DAO also experienced an exploit in which an attacker allegedly minted trillions of vsdCRV tokens before exchanging them for Ether.
Although these incidents involved different vulnerabilities, they shared a similar outcome. Attackers gained the ability to create tokens outside the expected supply process, sell them into available liquidity and cause severe price declines.
