Trader Loses Investment in USDR Swap on DEX
In a recent crisis involving the real-estate-backed stablecoin Real USD (USDR), a trader made a swap on the BNB Chain’s decentralized exchange OpenOcean. The trader exchanged 131,350 USDR for 0 USD Coin (USDC), resulting in a complete loss on their investment. The swap took place when USDR depegged from its par value by almost 50% due to a liquidity crunch.
MEV Bot Profits from Discrepancy
An arbitrage trade was executed by a maximal extractable value (MEV) bot that detected the discrepancy caused by the depegging of USDR. The bot managed to earn $107,002 in profits through this trade.
The Issue with USDR and its Backing Assets
On October 11, USDR depegged after users requested over 10 million stablecoins in redemptions. Although USDR was 100% backed, only around 15% of its $45 million assets were backed by liquid TNGBL tokens, with the rest backed by illiquid tokenized real estate assets.
The problem arose because the tokenized assets were minted using the ERC-721 standard, which couldn’t be fractionalized to provide liquidity for investor redemptions. Additionally, the underlying homes couldn’t be immediately sold to meet withdrawal requests from investors. As a result, the Real USD treasury failed to meet redemptions and investor confidence collapsed.
Hot Take: Lack of Liquidity and Asset Fractionalization Lead to Investor Losses
The crisis surrounding USDR highlights the importance of liquidity and asset fractionalization in stablecoins. When stablecoins are backed by illiquid assets or assets that cannot be easily sold or fractionalized, they become vulnerable to liquidity crunches and are unable to meet investor redemptions. This can lead to a loss of confidence in the stablecoin and result in financial losses for investors.
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