USP Stablecoin Loses Dollar Peg as DeFi Protocol Platypus Suffers $8.5M Attack

Decentralized finance (DeFi) protocol Platypus Finance suffered a flash-loan attack on Thursday, blockchain security firm CertiK tweeted. The potential loss in the exploit is $8.5 million.

Platypus USD (USP), the protocol’s stablecoin, lost its price peg to the dollar as a result of the exploit, falling to 48 cents from its $1 anchor, according to CoinGecko.

"For now all operations are paused until we get more clarity," a Platypus team member posted in the protocol's Discord server.

Platypus is an automated market maker built on the Avalanche blockchain where crypto traders can swap stablecoins. It has $59 million worth of digital assets locked on the protocol, significantly less than the all-time high of $1.2 billion reached last March, data by DefiLlama shows.

A flash loan is a type of uncollateralized borrowing popular on decentralized finance (DeFi) lending protocols among traders to quickly profit from arbitrage opportunities. However, exploiters often tap flash loans to destabilize and drain digital assets from DeFi protocols.