Historical bad-debt events

Evidence summary #

Reframed as insurance-fund-shortfall / bad-debt events on dYdX v4 only (per pre-mark; v3 YFI $9M event excluded per U2). v4-specific record: (1) October 10, 2025 chain halt — isolated market liquidation edge case triggered a false-negative insurance-fund balance check; protocol auto-halted (~8 hours); insurance fund was well-capitalized and no actual bad debt occurred; $462K compensation approved from fund (27 affected addresses). (2) March 2025 DAO governance approved $10M USDC transfer from insurance fund to operations subDAOs (Proposal #372), reducing fund from ~$17M to ~$7M before replenishment. Fund replenished to ~$16M by Oct 2025 via liquidation fees (~$613K/month avg). No v4 bad-debt events confirmed. Yellow because: insurance fund was reduced by governance action for non-safety purposes, creating a structural adequacy risk; October 2025 halt exposed a liquidation accounting bug that could cause chain downtime (blocking liquidations) during a volatile period.

Sources #

Methodology #

Count and sum (USD) the number of documented bad-debt events where the protocol socialized losses across depositors.

See the full factor methodology and distribution across all protocols →