MakerDAO Black Thursday: How a Bot Acquired $8.32 Million in ETH for Free

On March 12, 2020, an automated program successfully acquired $8.32 million worth of ETH without any vulnerabilities or hacks. This event was not due to a technical flaw but stemmed from the failure of a hidden assumption within MakerDAO, one of the most trusted protocols in the DeFi News space, under extreme market pressure. The core mechanism of MakerDAO allows users to borrow DAI stablecoins using ETH as collateral. When the collateral value drops to a critical point, the system initiates an on-chain auction where robots called "keepers" bid on the collateralized ETH to repay the debt, thereby maintaining the protocol's solvency. The effectiveness of this mechanism relies on a crucial premise: multiple robots will participate in the bidding simultaneously, ensuring the normal operation of the price discovery mechanism.

However, on March 12, 2020, the price of ETH plummeted by 43% within hours, triggering the liquidation of hundreds of collateralized positions simultaneously. The network instantly became congested, and Gas fees soared more than tenfold. As most keeper robots used fixed Gas fee settings, their transactions were stuck in the mempool and could not be included on the chain, causing the bidding to completely stall. At this point, one robot discovered this opportunity: it submitted a bid price of 0 DAI and waited for the auction to end. Due to the lack of competition, it successfully acquired a large amount of ETH at zero cost. In nearly 40 minutes, it repeatedly performed this operation, accumulating $8.32 million worth of ETH until the network recovered and other robots came back online.

The event resulted in MakerDAO experiencing $4.5 million in bad debt, an unprecedented loss in the protocol's history. To fill the gap, MKR token holders voted to issue new tokens and sell them on the market, indirectly diluting the equity of all existing holders. It is worth pondering that the entire system did not malfunction—the auction process was executed strictly according to the code, and the robot did not violate any rules. The problem lay in the system design's insufficient estimation of the vulnerability to real-world fluctuations. This event, known as "Black Thursday," completely reshaped the DeFi News industry's understanding of liquidity crises, robot collaboration, and block space competition. Since then, the design of almost all DeFi News liquidation mechanisms has used this event as a mirror, strengthening the consideration of fault tolerance and delay compensation mechanisms under extreme market conditions.