Titan Token, one of DeFi protocol Iron Finance’s two crypto’s suddenly crashed to almost zero in what insiders are calling a “DeFi bank run”
Iron Finance is a DeFi protocol which utilizes two separate cryptocurrencies, IRON and TITAN, the former acting as a stablecoin. Users can either mint or redeem IRON tokens which, in some circumstances could actually drive up the demand for TITAN tokens, and this appears to be exactly what has happened in this case.
As the price for TITAN tokens skyrocketed, larger investors dumped their tokens to realise profits, causing a chain reaction of panicked smaller investors to also sell, driving down the price, which in turn caused IRON to slip down off it’s dollar peg. Users were then able to redeem tokens at a lower than market value, but of course, this required the minting of new TITAN tokens each time it happened, and the spiral occured, with the market being flooded by freshly-minted TITAN tokens. As with all downward spirals, the momentum increased, crashing the price down to almost zero.
The team behind Iron Finance described this is a DeFi “bank run”, likening it to a situation where people flock to their bank to withdraw their money under fears that the institution did not have sufficient capital on hand. The price chart below shows the massive dump wiping out the not insignificant growth seen recently:
Iron Finance released a statement on it’s Twitter account stating that users need to wait for 12 hours for the timelock to pass before USDC redemptions were once again possible, but it is not known what the net effect overall will be on the project.
And it’s not the first time Iron Finance has endured a very bad news day. Just last month, in may 2021, the protocol lost over $170,000 from it’s liquidity pools to a malicious actor who managed to exploit the system following a poorly executed FaaS upgrade. At that time, the native SIL token was exploited, and SIL was later relaunched as sIRON.
And at only 3 months old, the protocol appears to have potentially destroyed it’s credibility in a little under the first quarter of going live, which could well be a new record. The SIL issue also led to more widespread criticism that Iron Finance wasn’t really DeFi if someone had the power to “reset the system”, although the protocol is not the only player in the market which has suffered similar problems, with Yam Finance, and even Binance being targeted by malicious actors. In a time when the DeFi landscape is still evolving by the day, investors will be looking for a good balance between enhanced security for assets and full decentralisation.