The dYdX community is reviewing a new proposal to compensate traders who suffered losses during the October 10 chain shutdown, with payouts totaling $462,097.79.
Summary
- dYdX is proposing $462,000 in compensation for users after an outage on October 10.
- 27 verified claims are to be paid from the protocol’s $16.2 million insurance fund.
- Incident traced to rare code release during high market volatility.
The dYdX community is reviewing a new proposal to compensate traders who suffered losses during the October 10 chain shutdown, with payouts totaling $462,097.79.
According to a message from October 28 after on the dYdX community forum, the exchange’s team identified 27 valid claims after investigating the disruption.
Chain stop linked to rare technical edge case
The dYdX Chain, built on Cosmos (ATOM), experienced instability during a period of extreme market volatility on October 10 around 5:35 PM ET. The system experienced a negative balance due to a rare bug in the exchange’s isolated market configuration, which triggered an automatic shutdown to preserve the state of the network.
Validators took several hours to restart oracle services, and outdated price feeds persisted briefly once the network resumed. While no money was directly lost on-chain, some users experienced liquidations and incorrect trade executions during the shutdown, resulting in financial losses.
According to dYdX Labs’ October 27 post-mortem, the problem was caused by a recent code update that was not properly organized. It also discovered issues with validator coordination, which are common in proof-of-stake systems and can result in oracle desynchronization during high-stress events, slowing recovery.
DeFi governance in action
The proposed payout is intended to increase confidence in dYdX’s decentralized governance structure. If authorized, affected wallets will receive a prorated payout of $462,097.79 in USD Coin (USDC). The move is compared to Binance’s $400 million user support program following its own system disruptions earlier this month.
Analysts say such incidents highlight both the transparency and risks of decentralized systems. While central exchanges can absorb losses internally, DeFi protocols rely on governance and insurance mechanisms to maintain user trust. The sense of community on the forum was largely positive, with most users supporting quick approval to wrap up the case before the end of October.
