A crypto cliffhanger that was brought back from the abyss

While Makro-Degens observed the Federal Reserve on Wednesday, crypto-degens concentrated on another drama: one with around 250 million

If not belongs , "Krypto-Winter". Bitcoin fell by more than 50 percent this year, and Ether has lost more than 66 percent. The lender Celsius has frozen customer withdrawals and reports that restructuring lawyers are commissioned. Coinbase almost releases a fifth of his considerable workforce. The season can have its own advertising agents.

A large wallet reached the abyss on Wednesday, where the liquidation would have triggered an avalanche of sales pressure. Its owner is not known. An early rumor - due to the likelihood of the data provider Nansen - was that the wallet belonged to the HEDGEE Arrows Capital (also known as 3AC), whose founder had published one vague twitter via "solve the problem" and is said to be under pressure. But the Nansen label has now been removed from the wallet, and a person with experience in the analysis of such things tells us that she does not believe that it belongs to 3AC.

if only 3ac or really we all have so lucky:

lol 106k 3ac ETH was saved from liquidation due to oracle update latency

Thanks to a delay of a few minutes, they have already risen by $ 18 million pic.twitter.com/e6qpcdg93l

-Eric Wall (@ercwl) 15. June 2022

It is a good exercise to explain how close the wallet came because it helps us to understand how lending and liquidation work in the world of defi.

The account supported its loan and paid part of his debts since his completion. But we can see that the wallet has now deposited $ 238 million in Ether as security on the Defi protocol/credit platform AAVE for $ 167-million loans from Stablecoins USD and USD.

Defi loans usually have to be overlooked, with smaller buffers for safer tokens and larger token. If the value of the pledged collateral drops under a certain threshold, the insolvency administrators enter.

liquidators are bots that bypass Defi protocols, identify wallets with underground loans and then liquidate the account by selling the collateral profitably-Dragonfly Research has a nice explanation of the details.

As soon as a wallet gets into defect, we are told that the liquidators intervene quickly. But on Wednesday morning the ether prize fell under the implied liquidation price. At that time the should be around 1.015 US dollar .

So what happened? Why was the account not dissolved?

As the tweet above explains, it was a problem of "oracle actization latency". However, this problem has nothing to do with Larry Ellison or microwave towers, as this is cryptoland and everything has to have a stupid name.

At the risk that an “oracle” will be simplified too much, it is essentially a data feed that helps smart contracts to fulfill its function. In this case, a service called Chainlink put prices in the blockchain so that the intelligent contracts of AAVE can use them for operation.

This is not the appointment market, and the update of prices in the chain is expensive. So they are not updated in real time. Instead, Chainlink updates on-chain prices when the "off-chain" data deviates by 0.5 percent or more from the last update, or hourly.

fell to around $ 1015 as an ether, it would have triggered a considerable liquidation if the criteria for the price had fulfilled to go into the chain.

But that didn't. It was not big enough compared to the price that was recorded in the previous on-chain update, and it was not an hour. Instead of losing around $ 250 million in Ether, the account had to live another day.

Such things, of course, constantly happen in Tradfi. In fact, it just happened recently, as our colleagues reported. During the market turbulence in March 2020, the Citigroup delayed an Intercontinental Exchange Margin Call, but ICE managers decided that it was more important not to "do no damage" and to avoid a "catastrophic" event.

What makes the AAVE incident so remarkable is that Defi is completely designed to avoid these situations.

The decision to grant Citi grace was deliberately made by a person who decided that bending rules serves the greater well -being of the market and the financial system.

There is a certain amount of flexibility in enforcement - and a certain degradation of the pricing - associated with an intensive human interaction. Your stock exchange takes you a break, or your broker just stops going on the phone for a while when the markets look ugly. Part of the libertarian stimulus of defi and crypto is that everything is mechanical; Smart contracts do not take care of the protection of financial stability.

retailers apparently can still suffer cryptopause. The moods of the crypto gods are simply much more arbitrary.