Scream, a decentralized finance (DeFi) protocol, has racked up a $35 million debt.
This comes after it failed to adjust the prices of the Fantom USD (fUSD) and Dei (DEI) stablecoins on its platform after they were ‘depegged’ from the US dollar. According to a tweet from December 16, 2022, the team is working on a solution to the problem.
$35M Bad Debt
In the crypto and decentralized finance (DeFi) industry, these are definitely chaotic times. The recent market volatility, combined with the significant surge in the US dollar. Some stablecoins have struggled to keep their USD pegs at 1:1 as a result of this.
Scream.sh, a decentralized peer-to-peer lending company based on the Fantom blockchain, has recently had a $35 million bad debtt 1:1. This comes after the company failed to adjust the price of two of its stablecoins when they went below the $1 level.
The Fantom USD (fUSD) and Dei (DEI) stablecoins were quoted at $1 on Scream, according to sources close to the situation. The market value of cryptoassets, on the other hand, had plummeted to $0.69 and $0.52, respectively.
To complicate things, Scream’s fUSD stablecoin deposit limit was set to unlimited rather than zero. Some consumers took advantage of the big price difference on the Scream platform. Those are the ones that deposited huge quantities of fUSD and DEI to borrow other stablecoins at a discounted rate. As a result, it depleted the platform’s assets, including DAI, FRAX, MIM, and Fantom USDT.
Fantom Foundation Comes to Aid
Scream’s total value locked (TVL) has dropped to $141.98 million at the time of writing this report. According to Defi Llama, it has decreased from $214.61 million on May 15, 2022. Some users who had deposited the misappropriated stablecoins were unable to withdraw their funds as a result of this.
The Scream team announced via a Twitter thread that they are now working on a remedy to the problem. In order to save the situation, the Fantom Foundation has decided to install a liquidation bot.
They took on this duty because their liquidation method is now being audited and will be issued in 3-4 weeks. This should boost the value of fUSD to $1.
Furthermore, the company has asked customers who have borrowed fUSD to repay all outstanding loans. This prevents it from being liquidated, as the price of fUSD will soon be hardcoded to $0.81.
Similarly, Scream has hinted that DEI’s principal lenders have agreed to repay their debt. The Deus Finance team has also revealed plans to offer treasury bonds in exchange for collateral to restore DEI to its prior 1 USD peg.
In related news, the funds in the pools of Blizz Finance and Venus Protocol DeFi platforms were also drained on May 13th. This was when users took advantage of the LUNA pricing differential on the networks to cheaply borrow other assets.
