- IRON Finance has outlined the “bank run” that caused its TITAN governance token to crash from $64 to $0 earlier this week
- IRON Finance cited that whales redeeming their IRON tokens incorrectly was the catalyst for the crash
- Holders panic sold after the initial drop, flooding the market with TITAN tokens
IRON Finance, the company behind the once popular TITAN token that crashed from $64 to $0 this week, has detailed the reasons behind the crash, sticking to their initial assessment of the collapse being down to a “bank run”. In a postmortem, IRON Finance blamed whales for redeeming their IRON tokens in the wrong way and said that the current system “could not be fixed”, leading to tough decisions needing to be taken regarding the future of the platform’s governance token.
“World’s First Large-scale Crypto Bank Run”
The collapse of the TITAN token stunned many in the crypto world who had bought into IRON Finance’s concept of a partially collateralized stablecoin, including billionaire Mark Cuban who had publicly added to the liquidity pool. In the immediate aftermath IRON Finance called the crash crypto’s first bank run, and, as their postmortem explains, this is indeed the narrative they are sticking to. In fact, they even upped the ante, calling it “the world’s first large-scale crypto bank run.”
IRON finance explains that the trouble started when whales began removing liquidity from the IRON/USDC pool and shifting TITAN to IRON and then into USDC through liquidity pools rather than redeeming their IRON. This caused the IRON price to “off-peg”, which in turn caused the TITAN price to crash 50%, although it recovered to $52 within an hour.
In doing so the protocol and code functioned “as normal”, leading the team to think that this was just one of a number of corrections that had already occurred “at least a dozen times” in the token’s history. However, the drop caused holders to panic sell, with many redeeming their pooled IRON and then selling the TITAN that was minted as part of the redemption policy. This resulted in TITAN tokens flooding the market and the price cratering further.
IRON Finance Between a Rock and Hard Place
IRON Finance calls the sequence of events “the worst thing that could happen to the protocol”, once more likening the crash to a bank run. IRON Finance added that while “nothing could be fixed in the current system” they have “learned a great deal” from the incident and will hire a third party to “conduct an in-depth analysis of the protocol”.
With the TITAN token now dead in the water and IRON Finance reluctant to amend the protocol, it will be interesting to see if there is a way of resurrecting this aspect of the platform. Given than TITAN was the governance token you would think they are keen to find a solution, but only time will tell if they are trusted by former users with any revised protocol.