The post Silo Finance’s Response to Chainlink Price Feed Anomaly on Arbitrum appeared on BitcoinEthereumNews.com.

In a recent development that has stirred the decentralized finance (DeFi) community, Silo Labs, the development team behind the decentralized lending protocol Silo Finance, reported an unexpected incident involving the Chainlink wstETH/ETH price feed on the Arbitrum network. Earlier today, the price feed displayed inaccurate values, an anomaly that resulted in the unintended liquidation of five user positions on the platform. The incident has raised concerns about the reliability of price feeds and the robustness of DeFi protocols in handling such anomalies. The inaccurate price feed was reportedly a result of unusual market activity on Arbitrum, a layer 2 scaling solution for Ethereum. Silo Finance’s automated liquidation system, designed to maintain the protocol’s health and stability, acted promptly in response to the price feed data. However, the rapid execution of these liquidations, while in line with the protocol’s design, led to unexpected losses for the affected users. Investigating the cause: Large transactions on Balancer V2 Silo Labs conducted a thorough investigation to understand the root cause of the price feed discrepancy. The team discovered that the fluctuation in the WSTETH/ETH price on Arbitrum was likely triggered by two significantly large transactions on Balancer V2, a popular automated market maker platform. These transactions were of such magnitude that they potentially influenced the Chainlink data provider’s volume-weighted average price (VWAP) calculation on the Arbitrum network. The Chainlink price feed, a critical component in the DeFi ecosystem, is designed to provide accurate and tamper-proof data for smart contracts. However, in this instance, the feed’s algorithm may have incorporated these large transactions into its calculations, leading to a temporary distortion in the reported price. The situation highlights the complexities and challenges in ensuring accurate data feeds in the dynamic and sometimes volatile DeFi market. Silo’s proactive measures and commitment to users In response to…

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Filed under: News - @ December 3, 2023 6:52 am