- Paradex will roll back transactions after an error caused thousands of liquidations.
- User funds are safe, a message on the project's website said.
- The incident has shaken investor confidence.
Paradex will roll back thousands of transactions after an error caused prices on the perpetual futures exchange to fall to zero, resulting in mass liquidations.
Shortly after the platform conducted maintenance at around 4:30am London time, thousands of trades on the platform were liquidated in a matter of seconds, social media reports and videos viewed by DL News showed.
Three hours later, Clement Ho, Paradex’s director of engineering, addressed panicked users in a Discord post.
“We have identified the issue and will be rolling back chain state to block 1604710 (4:27:54 UTC),” he said. “This is the time before the DB maintenance and is the last known correct state.”
“Recovery efforts are ongoing. We can confirm that all user funds are SAFU,” a message on the Paradex website said.
After the publication of this story, Paradex told DL News that “the team was communicating live with users on Discord from the moment the maintenance issue started” and that three-hour-delay makes it “sound like a delayed response.”
DL News could not independently verify the claim due to restrictions on new members joining at the time.
It’s not clear how many users were affected by the error, nor the value of the funds liquidated. Paradex’s block explorer went offline shortly after the mass liquidations occurred.
But the exchange processed almost $1.6 billion worth of trades the day prior, according to DefiLlama data, while CoinGecko reported $652 million worth of open interest over the past 24 hours.
Shaken confidence
Rollbacks are usually a last resort for blockchain projects as they undermine the core purpose of the technology: to provide a single, consistent, and immutable shared ledger of transactions.
This incident has shaken investor confidence in Paradex, which aims to provide a zero-fee perps trading with deep liquidity and privacy.
The platform is incubated by Paradigm, the institutional crypto derivatives liquidity network, not the venture firm of the same name. In 2021, Paradigm raised $35 million at a $400 million valuation from investors including Jump Capital, Alameda Ventures, Genesis, and Nexo.
Paradex is not the first perp exchange to encounter issues in recent months.
Hyperliquid, the biggest perps exchange by 30-day trading volume, has lost tens of millions of dollars over the past year after its markets were attacked by large traders.
In August, a trader inflated the value of futures contracts for the XPL token by 200%, netting $15 million and inflicting heavy losses for other traders.
It’s not yet clear when users with funds trapped on Paradex will be able to access them again.
“Due to the complexity of the recovery process, we do not have a confirmed ETA at this time,” Paradex said. “We will provide further updates as they become available.”
Update, January 22: After publication, Paradex told DL News that its team was communicating with users in real time on Discord. This detail has now been added to the story, with a note that DL News could not independently verify the claim at the time because DL News was unable to join the Discord server. The story has also been updated to include links to several tweets supporting the assertion that investor confidence was shaken. Paradex also said the site was offline for approximately six hours and is now fully operational; that refunds for erroneous liquidations are underway; and that a post-mortem would be published. These claims have not been added to the article because the facts reported were accurate at the time of publication.
Correction, January 22: A previous version of this story incorrectly stated that Paradex “shut down” the explorer. The explorer went offline. This has been corrected.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
