- dYdX plans to compensate traders affected by the October 10 chain halt from its insurance fund.
- The outage caused liquidations and incorrect trades despite no funds lost on the blockchain.
- Binance faced similar disruptions and offered $728 million in support without admitting responsibility.
The dYdX community is reviewing a proposal to compensate traders impacted by the chain halt on October 10. The proposed payouts total $462,097.79. The forum post on October 28 stated that 27 valid claims were identified after investigating the incident. The disruption occurred during extreme market volatility around 5:35 PM ET.
The dYdX Chain, built on the Cosmos Hub, experienced a negative balance due to a rare bug in its isolated market configuration. The system automatically halted to maintain network stability. Validators took several hours to restart oracle services, and stale price feeds briefly appeared when the network resumed. No funds were directly lost on-chain, but some users faced liquidations and incorrect trade executions.
Cause and Technical Review
dYdX Labs’ post-mortem report on October 27 attributed the outage to a misordered code process. The update was not properly organized, which contributed to the disruption. The report also highlighted coordination issues among validators, a common challenge in proof-of-stake systems.
Oracle desynchronization delayed recovery and caused temporary price inaccuracies. The proposed compensation aims to maintain user confidence in decentralized governance. If approved, affected wallets will receive proportional distributions in USD Coin (USDC).
Market Context and Community Response
The chain halt coincided with the largest crypto liquidation event in history. Traders faced unexpected losses while the system executed trades at incorrect prices. The event wiped out approximately $19 billion in positions across the market. Community response on the dYdX forum has been mostly positive. Moreover, five leading altcoins, including Aptos, Pi, and Sui, recently plunged over 50% as crypto liquidations surpassed $900 million globally.
Users favor swift approval to address losses before the end of October. Analysts observe that DeFi platforms are based on governance and insurance systems, whereas centralized exchanges have been able to absorb losses internally.
Comparisons with Other Exchanges
Binance also faced system disruptions during the same market downturn. Users reported interface errors, including negative token prices and issues with Ethena’s USDe stablecoin. Binance launched a $400 million support initiative, including $300 million in token vouchers and $100 million for impacted traders. Binance also recently froze 600 wallets for bot misuse, triggering brief market volatility.
Voucher eligibility required forced liquidations, losses of at least $50, and losses representing at least 30% of net worth. Binance also introduced a $45 million BNB token airdrop to support memecoin traders. Overall, the exchange pledged $728 million but did not accept responsibility for user losses. dYdX’s proposal follows a similar approach, offering direct compensation through its insurance fund.
