{"id":482775,"date":"2025-05-30T14:19:53","date_gmt":"2025-05-30T13:19:53","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=482775"},"modified":"2025-10-11T14:50:47","modified_gmt":"2025-10-11T13:50:47","slug":"chainlink-oracle-malfunction-sparks-500k-in-defi-liquidations-reignites-reliability-debate","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/chainlink-oracle-malfunction-sparks-500k-in-defi-liquidations-reignites-reliability-debate\/","title":{"rendered":"Chainlink oracle &#8216;malfunction&#8217; sparks $500k in DeFi liquidations, reignites oracle debate"},"content":{"rendered":"<p>A <a href=\"https:\/\/cryptoslate.com\/coins\/chainlink\/\">Chainlink<\/a> price feed's alleged malfunction led to more than $500,000 in liquidations on May 29, sparking fresh debate over the reliability of oracles in DeFi.<\/p>\n<p data-start=\"241\" data-end=\"605\">According to <a href=\"https:\/\/x.com\/yieldsandmore\/status\/1928088364898521438\">reports<\/a>, Chainlink's price oracle for the deUSD stablecoin inaccurately reported its value at $1.03. The incorrect data triggered liquidations for users holding deUSD-denominated debt on <a href=\"https:\/\/cryptoslate.com\/coins\/avalanche\/\">Avalanche's<\/a> <a href=\"https:\/\/cryptoslate.com\/coins\/euler\/\">Euler Finance<\/a> lending protocol.<\/p>\n<p data-start=\"241\" data-end=\"605\">The impact was severe, especially for those leveraging the asset, which is backed by real-world assets (RWAs) and known for its high-yield potential.<\/p>\n<p data-start=\"607\" data-end=\"957\"><a href=\"https:\/\/cryptoslate.com\/coins\/elixir-deusd\/\">deUSD, issued by Elixir<\/a>, has a total supply of $185 million, with $42.7 million circulating on Avalanche. Due to its yield profile, it has been widely used as collateral, often allowing traders to leverage positions up to 10x to chase outsized returns.<\/p>\n<p data-start=\"607\" data-end=\"957\">However, that same leverage turned catastrophic when the mispriced data cascaded into forced liquidations.<\/p>\n<h2>Industry reacts to Chainlink's alleged misstep<\/h2>\n<p>The incident reignited scrutiny around on-chain oracles. Critics argue these systems are vulnerable to manipulation and errors, especially when operating in illiquid markets.<\/p>\n<p>Omer Goldberg, founder of Chaos Labs, took to X to criticize Chainlink, <a href=\"https:\/\/x.com\/omeragoldberg\/status\/1928179424966373657?s=46\">claiming<\/a> that the oracle delayed an essential price update by 25 minutes.<\/p>\n<p>He also suggested the price feed might rely too heavily on APIs like CoinGecko, which he said is inappropriate for stablecoin pricing.<\/p>\n<p>Goldberg further claimed that using volume-weighted average price (VWAP) in illiquid pools exposes protocols to exploitation. He added:<\/p>\n<blockquote><p>&#8220;The point of the oracle is to secure value and protect users. If the oracle is &#8216;dumb' and just spits out pool prices, why even use Chainlink at all?&#8221;<\/p><\/blockquote>\n<p>However, not all voices aligned with the criticism.<\/p>\n<p>Chainlink's Community Liaison, Zack Rynes, pushed back against the allegations. He clarified that Chainlink merely reflects aggregated market activity and that it is up to individual protocols to interpret or filter the data.<\/p>\n<p>Rynes added that a single Curve pool accounted for half of the daily volume that day and temporarily pushed the price above $1, which Chainlink accurately captured in its VWAP. He <a href=\"https:\/\/x.com\/ChainLinkGod\/status\/1928190182706270668\">wrote<\/a>:<\/p>\n<blockquote><p>&#8220;Chainlink puts the data users want onchain in the format they want, the protocols are responsible for ensuring that data meets their requirements and implements any additional subjective checks or limits they want.&#8221;<\/p><\/blockquote>\n<p>Meanwhile, Marc Zeller of the <a href=\"https:\/\/cryptoslate.com\/coins\/aave\/\">Aave<\/a> Chan Initiative said the fault lies in protocols treating volatile or illiquid assets like mature collateral. He warned against labeling risk shortcuts as innovation, saying it ultimately exposes users.<\/p>\n<p>Zeller <a href=\"https:\/\/x.com\/lemiscate\/status\/1928406870777024780\">concluded<\/a>:<\/p>\n<blockquote><p>&#8220;Chainlink did their job.&#8221;<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>A Chainlink price feed&#8217;s alleged malfunction led to more than $500,000 in liquidations on May 29, sparking fresh debate over the reliability of oracles in DeFi. According to reports, Chainlink&#8217;s price oracle for the deUSD stablecoin inaccurately reported its value at $1.03. The incorrect data triggered liquidations for users holding deUSD-denominated debt on Avalanche&#8217;s Euler [&hellip;]<\/p>\n","protected":false},"author":720,"featured_media":482778,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46940,77968,80621,37,6849],"tags":[74600],"prediction_market_topic":[],"post_folder":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.9 (Yoast SEO v21.9.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Chainlink oracle &#039;malfunction&#039; sparks $500k in DeFi liquidations, reignites oracle debate<\/title>\n<meta name=\"description\" content=\"Chainlink price feed error triggers $500,000 in liquidations, sparking oracle reliability debate within community.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/cryptoslate.com\/chainlink-oracle-malfunction-sparks-500k-in-defi-liquidations-reignites-reliability-debate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Chainlink oracle &#039;malfunction&#039; sparks $500k in DeFi liquidations, reignites oracle debate\" \/>\n<meta property=\"og:description\" content=\"Chainlink price feed error triggers $500,000 in liquidations, sparking oracle reliability debate within community.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/cryptoslate.com\/chainlink-oracle-malfunction-sparks-500k-in-defi-liquidations-reignites-reliability-debate\/\" \/>\n<meta property=\"og:site_name\" content=\"CryptoSlate\" \/>\n<meta property=\"article:published_time\" content=\"2025-05-30T13:19:53+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-10-11T13:50:47+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2025\/05\/chainlink-avax-malfunction.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Oluwapelumi Adejumo\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cryptoslate\" \/>\n<meta name=\"twitter:site\" content=\"@cryptoslate\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Oluwapelumi Adejumo\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"NewsArticle\",\"@id\":\"https:\/\/cryptoslate.com\/chainlink-oracle-malfunction-sparks-500k-in-defi-liquidations-reignites-reliability-debate\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/cryptoslate.com\/chainlink-oracle-malfunction-sparks-500k-in-defi-liquidations-reignites-reliability-debate\/\"},\"author\":{\"@type\":\"Person\",\"@id\":\"https:\/\/cryptoslate.com\/author\/oluwapelumi-adejumo\/#person\",\"name\":\"Oluwapelumi Adejumo\",\"url\":\"https:\/\/cryptoslate.com\/author\/oluwapelumi-adejumo\/\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/cryptoslate.com\/author\/oluwapelumi-adejumo\/\"},\"image\":{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/cryptoslate.com\/author\/oluwapelumi-adejumo\/#authorimage\",\"url\":\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2025\/12\/profile-photo-oluwapelumi-adejumo-300x300.jpg\",\"contentUrl\":\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2025\/12\/profile-photo-oluwapelumi-adejumo-300x300.jpg\",\"caption\":\"Oluwapelumi Adejumo\"},\"jobTitle\":\"Senior Reporter\",\"description\":\"Oluwapelumi values Bitcoin's potential. 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