Traders exchanged 131K stablecoins for USD during USDR decoupling

During the October 11 crisis involving the real estate-backed U.S. dollar stablecoin Real USD (USDR), one trader appeared to have exchanged 131,350 USDR for $0 tokens resulting in a complete loss of investment.

According to the report of Lookonchain, an analysis company on this site, on October 12, the swap was conducted on the BNB chain through the decentralized exchange (DEX) OpenOcean. At that time, USDR was decoupled from the par value by nearly 50% due to liquidity crunch. %. The Maximum Extractable Value (MEV) bot then spotted the discrepancy, making a total of $107,002 in profit from the arbitrage trade.

During periods of poor liquidity, DEX slippage can be as high as 100%. In September 2022, Cointelegraph reported that a trader attempted to sell $1.8 million in Compound USD (cUSDC) via Uniswap v2, but only received $500 worth of the asset in return. In this case, another MEV entered into an arbitrage trade and within hours more than $1 million in profits were hacked.

On October 11, USDR decoupled after users requested redemption of more than 10 million stablecoins. Despite being 100% backed, less than 15% of its $45 million in assets at the time was backed by liquid TNGBL tokens, with the remainder backed by illiquid tokenized real estate assets.

As analyst Tom Wan explains, tokenized assets are minted according to the ERC-721 standard and cannot be split to create liquidity for investor redemptions. Additionally, the subject home cannot be sold immediately to satisfy the investor’s withdrawal requirements. All in all, real U.S. Treasury bonds were unable to meet redemption requests, leading to a collapse in investor confidence.

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