Iron Finance is / was a “multi-chain partially-collateralized algorithmic stablecoin ecosystem". On Binance Smart Chain, IRON uses BUSD and their native token STEEL as collateral to maintain a peg at $1. On Polygon, IRON used USDC and their native token TITAN to maintain the peg. The incident started when TITAN became overpriced, perhaps due to users purchasing the token in order to farm TITAN pairs at ~50,000% APY. Some large TITAN sales were made and the price became volatile, making investors nervous, and leading them to also sell their tokens. This created a situation in which users could now redeem a token worth 90 cents, for 75 cents of stablecoin and 25 cents of TITAN. An incredible arbitrage opportunity which required minting new TITAN tokens each time. The market was flooded with freshly minted TITAN, and a panic sale began, pushing down the TITAN price and therefore making the IRON stablecoin lose its peg even further.
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