Recently, the Real USD (USDR) stablecoin found itself in the midst of a chaotic storm. On October 11, liquidity troubles caused a trader to swap 131,350 USDR for 0 USDC, resulting in a complete loss. USDR was advertised as a 100% backed stablecoin, but a shocking revelation emerged – only 15% of its $45 million in assets were backed by liquid TNGBL tokens, with the majority relying on illiquid tokenized real-estate assets.
The illiquid real-estate assets were tokenized under the ERC-721 standard, making them difficult to fractionalize. This created a liquidity conundrum for investor redemptions, leaving the USDR treasury unable to honour these redemptions, leading to a crisis of confidence.
In the volatile world of DeFi, where slippage rates on DEXs can reach up to 100% during periods of poor liquidity, a maximal extractable value (MEV) bot seized an arbitrage opportunity, profiting a staggering $107,002 from the misfortunate trade.
The USDR liquidity crunch serves as a reminder of the risks associated with DeFi, and how quickly things can change in the space.
