On January 27 decentralized stablecoin MIM has experienced minor depeg as user sentiment dropped after the whole “Frog Nation” ecosystem came under fire as some disturbing information about 0xSifu (CFO of Wonderland) and Daniele Sesta (founder of Frog Nation) surfaced.

As MIM price dropped to almost 97 cents according to Chainlink Data Feeds many Decentralized Exchanges and their liquidity providers experienced large strain as trading volume increased rapidly. Curve Finance being the largest DEX took the largest hit providing liquidity for more than 2 billion worth of MIM trades over just a couple of days.

Because of people swapping their MIM for other stablecoins, the Curve pool became largely unbalanced with Magic Internet Money corresponding to more than 90% share of liquidity at times.

While Curve was mostly able to maintain the peg and remain operational other protocols were not so lucky as Platypus Finance, a VC-backed DEX on Avalanche, which describes itself as a “whole new kind of AMM for StableSwap” had to stop all trades, deposits and withdrawals.

Essentially, Platypus had too much MIM and not enough of other stablecoins in their pools, as those became under-covered by more than ten perccent. To resolve this issue Platypus’ team withdrew liquidity, bridged it to Ethereum mainnet, swapped more than 85 million worth of MIM for USDC through an OTC deal and bridged it back to Avalanche.

However, it seems that ironically the OTC dealer used Curve to perform the swap for Platypus which was quickly discovered by Twitter users.

This and the fact that Platypus uses upgradeable contracts (i.e. they can change the way smart contracts operate at any time) with developers having what seems to be unlimited control over user’s funds and protocol’s operations sparked a lively discussion on Twitter. Many accounts (including Curve themselves) quickly pointed out that such a situation wouldn’t be possible on Curve due to its decentralized nature and swapping mechanism.

On the other side of barricades, the smart contract lead for Platypus and many others jumped to defend the protocol’s design citing its early stages and MIM withdrawal under the premise of protecting users’ funds.

Thankfully despite all the drama Platypus team restored trading for USDC, USDT and DAI in ~3 hours with the page that allows users to withdraw their MIM being deployed shortly after.

While both CRV and PTP tokens sustained noticeable price drops during that time, as a result of the whole situation a lot of trust was either built or lost by both of these protocols. However, it is too early to draw any conclusions and yet remains to be seen whether the Platypus would be able to topple the giant that is Curve Finance with a 33-fold difference in TVL between the two of them.

Finally, if you want to learn more about different AMMs on Avalanche and how they work be sure to check out this article.

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