Stale Chainlink LUNA Floor Price Lets Attackers Drain $21.8M From Two Lending Markets

Fallout from Terra's collapse claimed two more victims this week. Venus Protocol, a lending market on BNB Chain, lost $13.5 million, while Blizz Finance, a lending market on Avalanche, lost $8.3 million — both due to the same underlying flaw.

As LUNA's price collapsed, the Chainlink price feed both platforms relied on stopped reflecting reality, letting borrowers pledge grossly overvalued LUNA as collateral and draw out real assets against it. Neither protocol had a circuit-breaker in place to stop this, and although warnings had reportedly circulated beforehand, neither team acted quickly enough to head off the losses.

01Terra's unraveling

By this point, the collapse of the Terra ecosystem was undeniable. The chain itself was briefly halted outright, and exchanges including Binance, Bybit, eToro, and dYdX suspended trading in LUNA and UST.

Block production on Terra later resumed, but the network remained far from functional — on-chain swaps stayed disabled and IBC channels stayed closed. A failed attempt to rescue UST sent LUNA's price down to fractions of a cent, a staggering fall from an all-time high near $120 barely a month earlier.

02The pricing gap that got exploited

The vulnerability traced back to Chainlink's oracle configuration: it had a hardcoded minimum price (minAnswer) for LUNA set at $0.10. Once LUNA's actual market price fell below that floor, the feed kept reporting $0.10 regardless — meaning anyone could buy real LUNA for a fraction of a cent and deposit it as collateral valued at ten cents, then borrow freely against the inflated figure.

Venus, which held roughly $1 billion in TVL, managed to suspend activity in time to avoid being fully drained, though $13.5 million still got out. A governance proposal is now pending to restore normal functionality, with LUNA and UST markets kept frozen in the meantime. Venus's official statement noted that the protocol would tap its Risk Fund to cover the resulting shortfall.

Blizz Finance had no such luck. A timelock delay meant the team couldn't respond fast enough, and the protocol was effectively emptied — its site now shows essentially all assets lent out against what is now worthless collateral, wiping out the platform's entire $8.3 million in TVL in short order.

Both protocols pointed to Chainlink, arguing the oracle's price feed had effectively "paused" on them. Chainlink responded with its own statement, explaining how its automatic circuit breaker is designed to function and pointing to best practices other protocols had followed to avoid this exact scenario.

03Lessons and lingering questions

The episode is a reminder that no protocol is immune to this kind of failure. A LUNA price under $0.10 may have seemed implausible when Chainlink's feed parameters were first configured, but once it became clear the token wasn't recovering, the minimum price should have been updated to match reality.

Relying on a reputable oracle provider like Chainlink is not, on its own, sufficient protection — it remains each protocol's responsibility to understand every moving part of its own system and integrate it safely, regardless of market conditions. As Chainlink's own documentation suggests, protocols should maintain their own independent circuit-breakers capable of pausing contracts under abnormal conditions.

These two losses are unlikely to be the last tied to Terra's implosion. After weeks of silence following the decision to abandon the original LUNA chain, Do Kwon has now published proposed plans for how the network might be revived. Meanwhile, the whereabouts of the roughly $3 billion in Bitcoin once held by the Luna Foundation Guard remain unaccounted for.