The creators of Silo Finance, Silo Labs, have revealed an incident involving the Chainlink wstETH/ETH price feed on Arbitrum. The feed displayed incorrect values, which resulted in the accidental liquidation of five user holdings.
Silo Labs, creators of the decentralized lending protocol Silo Finance, recently informed the DeFi community of an unforeseen event affecting the Chainlink wstETH/ETH pricing feed on the Arbitrum network. Five users’ holdings were accidentally liquidated earlier today due to an irregularity in the pricing feed that reflected the wrong amounts. As a result of this occurrence, many are wondering how reliable price feeds are and how well DeFi systems handle anomalies like this.
Arbitrum, an Ethereum layer 2 scaling solution, reportedly saw unexpected market activity, leading to the incorrect price feed. Quickly responding to the price feed data, Silo Finance’s automatic liquidation mechanism ensured the protocol’s health and stability. The impacted users experienced unanticipated losses due to the quick execution of these liquidations, even though this was in keeping with the protocol’s design.
Silo Labs performed a detailed analysis to get to the bottom of the price feed disparity. Two rather large transactions on the widely used automated market maker platform Balancer V2 were likely the cause of the Arbitrum WSTETH/ETH price volatility, the study found. Due to the size of these transactions, they may have affected the Chainlink data provider’s VWAP computation on the Arbitrum network.
To ensure that smart contracts have access to reliable and unchangeable data, the DeFi ecosystem relies on the Chainlink pricing feed. But in this case, the quoted price may have been temporarily affected since the feed’s algorithm included these big transactions in its calculations. This incident illustrates the difficulties and complications of maintaining reliable data feeds in the ever-changing and, at times, unpredictable DeFi industry.
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