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On March 12, 2020, a single bot acquired $8.32 million in revenue $ETH and paid nothing at all.
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MakerDAO’s liquidation system worked exactly as designed, and that was the problem.
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Every major DeFi protocol built after 2020 has its risk design boiled down to a single 40-minute window.
On March 12, 2020, one bot acquired $8.32 million $ETH and I didn’t pay anything for it. There was no hack and no exploit. Just a broken assumption within one of DeFi’s most trusted protocols and a 40-minute window that no one saw coming.
Here’s the story.
What the MakerDAO system is built for
MakerDAO allows users to lock $ETH as collateral for borrowing $DAI. When that collateral loses too much value, the vault is liquidated via an on-chain auction. Bots called goalkeepers provide $DAI to purchase the collateral, the debt is covered and the protocol remains solvent.
The entire mechanism was based on one assumption that was correct: that competing bots would always appear.
The 40 minutes that destroyed DeFi
$ETH fell by 43% in hours that day. Hundreds of vaults went underwater at the same time, and every keeper bot on the network tried to respond immediately. Ethereum couldn’t handle the traffic. Gas prices increased tenfold and most keeper bots were running on fixed gas settings, leaving their transactions stuck in the mempool and going nowhere.
Auctions were opened and no one bid.
One bot noticed. A bid of 0 has been made $DAIwaited the timer and really collected $ETH free if no competing bids were received. Then it did it again. For almost 40 minutes, that one bot swept auction after auction without any fees and walked away with $8.32 million in revenue. $ETH before the network stabilized and other bots were able to get back in.
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MKR holders paid the price
MakerDAO was left with $4.5 million in bad debt, something the protocol had never dealt with before. MKR holders voted to mint new tokens and sell them on the open market just to cover the shortfall, diluting every existing holder in the process.
The contract did exactly what it was coded to do. The auction went smoothly. The bot followed the rules.
As one observer summed it up in the now-viral thread on X: “The protocol didn’t break because the rules were wrong. It broke because its design assumed continued market participation at the precise moment when the market became least functional.”
Why the story still matters
Analysts say every major DeFi liquidation system built after 2020 reduces its risk design to a 40-minute window. Black Thursday changed the way the entire industry approaches risk when liquidity, bots and block space fail all at once.
With DeFi liquidations back in the news and billions under pressure due to the ongoing war between the US, Israel and Iran, the lesson seems different at the moment.