MetronomeDAO disclosed a $15.7 million shortfall in its synthetic swap module, confirming that 6,367 msETH and 4.57 million msUSD in circulation lack full collateral backing. The deficit stems from prolonged exploitation of delayed price data within the protocol's swapping mechanism.
The undercollateralized supply drove Metronome's msUSD stablecoin 30 percent below peg, hitting holders and liquidity providers inside the protocol.
Trading bots systematically exploited stale oracle pricing, capitalizing on the lag between real-world asset prices and their on-chain updates at Metronome, executing arbitrage trades over several months.
Metronome attributed the shortfall primarily to Chainlink price-oracle update delays during swap executions and an inadequate fee structure on Base, which compounded the systematic drain.
The unbacked assets represent a material share of Metronome's synthetic supply: 31 percent of all msETH and 16 percent of msUSD now lack full backing, a deficit that accumulated as billions in cumulative swap volume passed through the module.
Metronome Synth lets users post collateral, mint synthetic assets and swap them in its marketplace. The protocol's zero-slippage swap design depends on accurate oracle pricing at execution time.
A risk report from Hindenrank previously graded Metronome Synth B-, warning that zero-slippage synthetic swaps are highly dependent on accurate oracle pricing and that delays or manipulation could enable traders to extract value from the protocol.
On-chain data shows traders who shorted msUSD against the de-pegged asset are sitting on substantial profits from the stablecoin's decline.
MetronomeDAO has outlined a remediation plan: the protocol intends to use treasury-owned looped positions, existing liquidity provider positions and future protocol revenue to buy back and burn the unbacked synthetic assets.
