Someone lost more than $500,000 in the deUSD liquidation, raising concerns about Chainlink's VWAP mechanism

PANews reported on May 30 that a trader lost more than $500,000 due to the VWAP mechanism of Chainlink oracles. The incident stemmed from a large $210,000 transaction by JaredFromSubway, a MEV bot on Ethereum, on Curve's deUSD/USDT pool, which caused the deUSD price to briefly spike to $1.03 in a low-liquidity market. This price movement is transmitted to the Avalanche network through a Chainlink oracle, triggering the liquidation of the user's position on the Euler lending platform.

Chainlink proponent "ChainLink God" explains that the oracle uses a market-wide VWAP pricing mechanism, and that deUSD has been flagged as a "high-risk asset." Chaos Labs founder Omer Goldberg pointed out that there are design flaws in using VWAP in illiquid pools, and suggested implementing a price cap or anti-outlier algorithm for stablecoins. According to the data, of the total supply of $185 million in deUSD, $42.7 million is circulating on the Avalanche chain.

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