Paradex Rolls Back Chain, Refunds $650K After Bitcoin Flashes $0
The Starknet-based exchange executed a controversial chain rollback to fix a database error that wiped out leveraged positions.
Starknet-based appchain Paradex has refunded $650,000 to approximately 200 users after a critical database error priced Bitcoin at zero, triggering a cascade of erroneous liquidations. The derivatives platform executed a rare blockchain rollback to resolve the incident, a move that restored user funds but highlighted the centralization risks inherent in nascent Layer 2 networks.
The $0 Bitcoin Glitch
The incident began during a scheduled database migration on Jan. 19. According to a post-mortem released by the protocol, a "race condition" corrupted the internal price feed, causing the system to value Bitcoin collateral at $0. The result was instantaneous: the liquidation engine, seeing accounts as technically insolvent, auto-nuked positions across the board.
"We have identified the issue and will be rolling back chain state to block 1604710. This is the time before the DB maintenance and is the last known correct state."
While refunds are standard practice for UI glitches, Paradex’s decision to perform a full chain rollback is technically significant. Unlike a simple database restoration on a centralized exchange (CEX), rolling back an L2 appchain involves reorganizing settled blocks. The move effectively erased the erroneous trades from the ledger entirely, returning the network to its pre-incident state.
Recovery and Market Reaction
Following the rollback, Paradex claims all impacted accounts have been fully reimbursed. The platform returned to full functionality after approximately eight hours of downtime. Despite the technical failure, liquidity providers appear undeterred; trading volume has since surpassed $1.5 billion, with Total Value Locked (TVL) and Open Interest returning to pre-incident levels.
This event serves as a sharp reminder of the "training wheels" phase for many L2 appchains, where developer multisigs often retain the power to alter chain history in emergencies, a safety feature that sits in direct tension with the ethos of immutability.
