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During the recent crisis involving Real USD (USDR), a real-estate-backed U.S. dollar stablecoin, a trader appears to have swapped 131,350 USDR for 0 USD Coin (USDC), resulting in a total loss of investment.
According to an October 12 report by blockchain analytics firm Lookonchain, the swap took place on the BNB Chain via the decentralized exchange OpenOcean. This occurred while USDR had depegged from its par value by nearly 50% due to a liquidity crunch. A maximal extractable value (MEV) bot subsequently exploited the discrepancy, netting $107,002 in profits through an arbitrage trade.
During periods of low liquidity, slippage on decentralized exchanges (DEXs) can reach up to 100%. In September 2022, Cointelegraph reported that a trader attempted to sell $1.8 million in Compound USD (cUSDC) through Uniswap DEX V2 but received only $500 worth of assets in return. An MEV bot performed an arbitrage trade in that incident as well, securing over $1 million in profits before being hacked just hours later.
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On October 11, USDR depegged after users requested redemptions for over 10 million stablecoins. Although the token was 100% backed, less than 15% of its then-$45 million in assets were held in liquid project tokens TNGBL, with the remainder backed by illiquid tokenized real-estate assets.
As explained by analyst Tom Wan, the tokenized assets were minted on the ERC-721 standard, which prevented fractionalization to generate liquidity for investor redemptions. Additionally, the underlying properties could not be sold immediately to meet withdrawal requests. Consequently, the Real USD Treasury could not fulfill the redemptions, leading to a collapse in investor confidence.
Why USDR depegged despite being fully backed: Using Illiquid asset backing liquid Asset
– USDR is 100% backed. 50% of them come from stablecoins and the remaining comes from Real-Estate
– When there is a bank-run (Huge Redemption of USDR), the Stablecoin liquidity in the… https://t.co/xOrsa5gpKU pic.twitter.com/OYhQ0twUUd— Tom Wan (@tomwanhh) October 12, 2023
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