Nostra, a decentralized finance (DeFi) lending protocol operating on Starknet, has temporarily suspended borrowing activities for two of its liquid staking tokens due to a significant error in its price feeds. This incident, which occurred on March 24, resulted in inflated price reports that could have led to unnecessary liquidations of user positions.
Key Takeaways
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Nostra identified a critical issue with its price feeds, inflating the values of xSTRK and sSTRK tokens.
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The reported prices were approximately three times higher than their actual values.
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Borrowing against xSTRK and sSTRK collateral has been disabled to protect user funds.
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Users are advised to withdraw their collateral immediately due to the lack of a fallback oracle.
The Price Feed Error
On March 24, Nostra reported that errors in its price feed had significantly inflated the prices of two liquid staking derivatives: xSTRK and sSTRK. These tokens are derivatives of Starknet's native STRK token. The inflated prices posed a risk of liquidating otherwise safe positions, potentially harming users who had healthy collateralized loans.
In a statement, Nostra emphasized the seriousness of the situation, noting that the inflated price feeds could have led to unnecessary liquidations. To mitigate this risk, the protocol has taken the precautionary step of disabling borrowing against these tokens.
User Recommendations
In light of the price feed issue, Nostra has recommended that users with existing deposits of xSTRK and sSTRK withdraw their collateral immediately. The protocol acknowledged that without a secondary or fallback oracle to support these assets, it cannot fully prevent similar issues from occurring in the future. Nostra stated:
"Our priority has always been and continues to be to keep existing user funds safe and with no fallback oracle, the risks outweigh the benefits."
Nostra's Position in the DeFi Space
Nostra is one of the larger DeFi projects on Starknet, which is a layer-2 scaling solution for Ethereum utilizing zero-knowledge proofs. Launched in late 2021, Starknet has a total value locked (TVL) of approximately $575 million, while Nostra itself has a TVL of around $55 million.
The protocol allows users to post collateral in one token to borrow another, with popular collateral options including Ether, STRK, and stablecoins like USDC and Tether (USDT). The incident highlights the inherent risks associated with DeFi protocols, particularly those relying on price feeds for collateral valuation.
Conclusion
The recent price feed error at Nostra serves as a reminder of the vulnerabilities present in the DeFi ecosystem. As the protocol works to address the issue and ensure user safety, it underscores the importance of robust risk management practices in decentralized finance. Users are encouraged to stay informed and take necessary precautions to protect their investments in the rapidly evolving crypto landscape.
Sources
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DeFi lender Nostra pauses borrowing after price feed error, Cointelegraph.
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Here’s what happened in crypto today — TradingView News, tradingview.com.
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