This is just the beginning
On June 17, Iron Finance experienced the first bank run in the history of crypto, something I followed closely because I was using their vaults and providing liquidity to the TITAN/MATIC pair and IRON/USDC pair at the time.
What unfolded was an epic collapse of their protocol, with investors redeeming $IRON at a rapid pace after the peg of $IRON to $USDC broke, creating a death spiral to the price of $TITAN, which was used as collateral to mint $IRON. There are many possible explanations as to how that could have been avoided, but I will focus on the protocol not capping the total supply of $TITAN at 1 billion as planned and disclosed by their team.
When the price of $TITAN went down, more $TITAN was needed to redeem $IRON at US$1. At one stage, the total supply of $TITAN went above the expected cap of 1 billion, and that was the trigger that started the panic sell and death spiral for $TITAN’s price. After the $TITAN’s price went down to nearly zero, the protocol stopped working as it did not have a solution for such an edge case. Then investors could not redeem $IRON anymore, so the minting of $TITAN stopped at around 27 trillion before the Iron Finance team could try to understand what just happened and stop the FUD on their communication channels.
Imagine the Federal Reserve doing all the quantitative easing that started in 2010/11 in the space of a few hours, taking the supply of the US dollar from 1 billion to 27 trillion within a single day. That is what happened to Iron Finance, unlimited printing (minting) of $TITAN that crashed its price. When there is a bank run, the banks close shop as there is no more money to hand out. That is why we see desperate deposit holders queueing in front of the banks hoping to recover their money. In the case of Iron Finance, the protocol should have stopped redeeming $IRON for $USDC and $TITAN when the total supply of 1 billion $TITAN was reached, similar to closing shop in the traditional banking system. Then panic sellers would not have had the option to redeem $IRON and the team would have had a chance of trying to restore back their confidence. Perhaps, there would have been arbitrage opportunities to buy back $TITAN at lower prices waiting for the panic selling action to resume, and then using $TITAN to mint $IRON again, burning $TITAN and reducing the total supply to less than 1 billion. The protocol might have withstood the first bank run in the history of crypto, but of course, that is just a hypothetical view of the events.
Now, after almost all $IRON in circulation has been redeemed at US$0.75 on a dollar, the total supply of $TITAN is close to 35 trillion, making it similar to a memecoin. However, the Iron Finance saga is not over. We, a group of $TITAN holders want to help $TITAN restore its value and we are working on different fronts to make $TITAN great again. If you want to join us on this epic saga of the crypto revolution and be part of history, this is your opportunity. Join our telegram channel:
