Coffin Dollar Stablecoin Depegs

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Coffin Dollar

Coffin Finance offers a prtially collateralized stablecoin on the Fantom blockchain. The peg was lost near the end of November 2021, after the protocol published a Medium article that seemed to question their own security. After a buy-back proposal failed to restore the peg, allowing it to drop all the way to a low of $0.05 on May 1st, 2022, Coffin Finance put forth a proposal to re-enable redemptions of Coffin Dollars for USDC or DAI on June 21st, 2022. A 5% fee would be applied. It appears that the resolution passed and the Coffin Dollar peg was successfully restored on June 27th, 2022.

There is no evidence of significant maintained loss in the Coffin Dollar protocol. The stablecoin temporarily lost the peg and subsequently restored to a peg around $0.95. Undoubtedly, many sold in the middle.

This is a global/international case not involving a specific country.

About Coffin Dollar

"Coffin Finance will be the first of its' kind, fully decentralized, capital-efficient, partially collateralized stable-token protocol on the Fantom Opera Network."

"The protocol aims to not only increase liquidity, while creating a way to store value on Fantom Opera Network, but also want see its' implementation as a medium for more advanced use-cases after a successful launch."

"We have and adamantly continue to learn from failures of our own and study those of the past.It is ferociously difficult to identify the true reasons for such failures, but we can take a guess."

"We believe we need to make improvements in terms of the following: Price Oracles, Deflationary mechanisms, Diversified collateral, Arbitrage opportunities, [and] Incentives to maintain the peg price."

"We believe in being flexible and quick to respond to market demands and changes. This is decided not only by us, but by our developers and the DAO community as well. Below are some of the ideas and features that might be available in the near future. Please keep in mind that we are constantly experimenting and collaborating with the community to find appropriate solutions and reach a mutually beneficial arrangement."

"As per our previous announcement, we are moving forward with more security updates." "As of November 15th, 2021," "We are going to" "double check all of our logic just to make sure that everything is as safe and functioning the way we believe it to be." "We feel that in times like these there is nothing more important than keeping up with and maintaining the security for ourselves and for our users. We are considering requesting an assessment by RugDoc KYC to weed out even the smallest flaws hidden in every code so we can patch them and continue on for one more Audit."

Shortly after posting the above (and roughly 5 months after Iron Finance depegged), the peg was lost in Coffin Finance. The price plummeted starting from November 18th, 2021.

"Currently we are facing issues similar to that of IRON Finance." "As noted in our original documentation, when a partially collateralized stable token falls below PEG, there is always a risk of a hyper inflationary event. (We have mentioned the possibility of such a “death spiral” in those documents..), It’s not a bug, neither an exploit."

"Fortunately, the strategic and well thought placement of our circuit breakers is the reason the protocol is still standing right now.." "We cannot assure you of anything at this moment, the danger is real, and the risk is still critical. Please, do not take risks from which you may or may not recover." "The time has now come where we must begin to reconsider multiple things. Even the very use of our own entire systematic structure and use of contemporary tokenomics."

"We’d like to make a series of proposals that are related in some way. Additional buyback & burn CoUSD using less than 5% CoUSD Collateral. Burn all XCOFFIN in treasury which is around 1.139M $COFFIN. Stop COFFIN emission. An idea about CoUSD pegged algo token (Tomb fork) without CoUSD mint/redeem."

"[T]he redeem function was suspended. A proposal to allow redemption CoUSD is up for vote as of June 21, 2022." "The collateral ratio backed by USDC and DAI is now greater than 100% for the time being. We would like to prepare to re-enable redemption COUSD for USDC or DAI due to several requests. A 5% fee is applied. 1 CoUSD equals 0.95 USDC or 0.95 DAI. The fee might possibly be utilized to create liquidity or buyback COFFIN or additional collateral for CoUSD."

"In terms of the buyback, we believe we should handle it rather than re-enable redeem as of now. CoUSD mint/redeem will still be kept suspended as of now. But COFFIN token holders still control it through votings / buyback by collateral. As you might know, CoUSD price got back 0.05=>0.5 after the last buyback. As long as there are enough collaterals ( now ), we can conduct buybacks to increase the value through voting. COFFIN emission is also related to the new protocol. They are related to tokens which are issued by Graveyard Finance. So we are going to make proposals on Snapshot.org for voting."

"Please know that we are doing everything we can to protect the protocol and its users. To adjust some settings flexibility, we might transfer more contract ownerships to devs temporary. (Collateral has still Timelock.)"

"By doing such we are able to move smoothly and fix the parameters. There are possibilities as follows. changing transfer tax. changing redemption delay changing minting fee. mint/redeem disabled temporary. changing redemption fee. add new tokenomics to reduce selling pressure. add governance token to reduce selling pressure. adjust TCR. etc"

The drop lasted all the way to a bottom of ~$0.05 on May 1st, 2022. However, by June 27th, 2022, the price had recovered to $0.95.

"It’s an experiment. We do not plan to prepare a frontend UI. We will provide instructions on the medium article. There are no plans to audit. If you have any concerns, please express them. Objections are welcome. If the developers have any issues, they will suspend immediately without warning. The mechanism is only effective when our USDC+DAI collateral in our collateral reserve contract exceeds the supply of CoUSD."

"As of the previous snapshot voting result, we are going to re-enable CoUSD redeem." "Redeem mechanism is only functional when USDC+DAI collateral in our CollateralReserve contract exceeds the supply of CoUSD. (In this case, collateral ratio is surely more than 100% as long as we believe DAI & USD value are both $1)."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

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• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Coffin Dollar Stablecoin Depegs

Date	Event	Description
November 18th, 2021	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $2,212,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

The total amount recovered is unknown.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.