People have been asking me all day if Titan (aka @IronFinance) was a rug. Did the team steal the money?

Here is an ELI5 explanation (While skipping some unnecessary details): $IRON $TITAN @IronFinance

1/22 Image
Let’s explain @IronFinance. It is a fork of @fraxfinance. IRON is a currency with the following rules: You can exchange $0.75 $USDC and $0.25 worth of $TITAN for 1 $IRON. The $USDC is sent to a vault and the $TITAN is burnt out of existence. Simple.

2/22 Image
The reverse can happen too. 1 $IRON can be exchanged for $0.75 USD and $0.25 worth of $TITAN anytime. The $USDC will be extracted from the vault and $0.25 worth of $TITAN will be minted which you can sell to get $1 back in total. Are the rules clear?

No one wants to use $IRON as a stablecoin, so decided to give out free $TITAN rewards for people who hold $IRON. APRs were decent so people decided to get more $IRON for themselves to farm these free $TITAN.

4/22 Image
$IRON can only be minted by burning $TITAN, so $TITAN was in high demand, causing $TITAN prices to pump. It started at $0.5 and went to $64 at its peak! Things were looking good and rosy for $TITAN prices.

5/22 Image
This is classic reflexivity in action.…

Decent APRs ➡️ Demand for IRON ➡️ TITAN supply burnt ➡️ TITAN Price Pump ➡️ Higher APRs ➡️ Higher Demand for IRON ➡️ … and so on.

It is a cycle that feeds itself. APRs went from a humble 50% to 960% at peak.
At the peak, $TITAN rewards were 3% of what you put in $IRON daily, and people started throwing life savings into this. It is a stablecoin farm after all…. 1 $IRON = $1..... Rightttt?

What happens when $TITAN prices are too high? The farms will simply give out too much $TITAN supply. At $TITAN's peak of $64, the farms were handing out $48m worth of TITAN a day! What happens when supply outstrips demand? Prices fall! Simple!

There weren't enough people minting $IRON to burn all the $TITAN being flooded into the market. When $TITAN prices started to look shaky, people started selling their farmed $TITAN instead of holding them. This caused $TITAN prices to dip.

9/22 uses a 10 min TWAP to determine how much TITAN it should give you for redeeming 1 IRON.

Here is an example: TITAN dropped 25% from $64 to $48 within 1 minute. The 10 min TWAP oracle lags behind and tells the protocol that TITAN is still around $60.

This means that anyone exchanging 1 $IRON for $0.75 USD got $0.25 worth of $TITAN at $60, which was only worth $0.2 in real time at $48. In other words, 1 $IRON is now redeemable for only $0.95 worth of goods. $IRON prices on DEXes started to drop to $0.95 in response.

Reflexivity primarily feeds on optimism and good vibes. What happens when $IRON deviates from $1? Some people will start to panic and sell their $IRON, thinking that this stablecoin may not actually work. $IRON depegs even more.

$TITAN Dumps➡️$IRON depegs ➡️$IRON holders panic sell and redeem ➡️$IRON redemptions get 75% $USD and 25% $TITAN ➡️$TITAN is sold for USD, causing $TITAN prices to drop ➡️10 min TWAP oracle lags behind ➡️IRON redemptions depegs further➡️...

What made this worse was that TITAN is minted everytime there is an IRON redemption. The cheaper TITAN prices got, the more TITAN got minted for every IRON redemption!

Example: When $TITAN is $0.01, $0.25 worth of $TITAN is 25 $TITAN! 25 $TITAN is $1600 at its ATH!

TITAN is now experiencing unchecked hyperinflation. Think of a central bank with debts to pay, but no cash on hand, so they decided to print more cash. This is classic Venezuela, paying debts by printing cash.


See the supply of $TITAN Image
I bet you understand now why $TITAN charts have no bounce, it's straight down all the way. Each time $TITAN tried to consolidate and bounce, $IRON redemptions would inflate the supply of $TITAN. Its straight to $0.

16/22 Image
It is an economic failure played out in a shorter timeline vs what is happening in Venezuela. ALL of you who lost money are willing participants in this economic experiment.

When you brought IRON/TITAN, you knowingly signed up for the experiment. I can't be sorry for you if you didn't read the fine print or look through the documentation to understand it.

Lastly, some apes are buying $TITAN and causing the prices to rebound. I would suggest you sell before 5 pm UTC.... if you bothered to read the announcements. Redemptions of IRON have been paused due to a bug and hyperinflation will resume soon.

The end. 19/22 Image

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More from @FinGeekCo

Jun 30, 2021… Yearn's yvDAI vault Compound strategy had a vulnerability. "In the event of a successful exploit, an attacker would have been able to liquidate an affected strategy's entire debt position on Compound and potentially capture liquidation fees."
Fixed within 3 hours of disclosure of _xyzaudits_. This hero saved a lot of money today. IIRC compound liquidation penalty is about 5%? So the total amount at risk was about $15m? Not sure if I did my math correctly. @iearnfinance $YFI
To be fair, liquidation on Compound is a fair race, and there is no guarantee the exploiter would have been able to get the liquidation fee anyway, plus the attack needed to be carried out several times for the vault to be liquidated fully.
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