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Iron Finance was a decentralized finance (DeFi) protocol on the Polygon blockchain.
In June 2021, the value of the protocol's tokens collapsed after large holders began liquidating their TITAN positions at peak prices, causing both the IRON stablecoin and TITAN token to fall sharply. The situation worsened when a smart contract malfunction temporarily prevented holders from redeeming IRON.
Iron Finance denied that the collapse was a rug pull, stating in a blog post that it resulted from a bank run triggered by the protocol's algorithmic design. Forbes described the event as a "wave of panic selling" after major investors sold large volumes of TITAN. The price decline exposed a design flaw that created arbitrage opportunities, accelerating further sell-offs.
TITAN was the protocol's native token and had no governance or ownership rights. It was required for minting IRON and could be staked in liquidity pools to facilitate trading.
The protocol's partial-collateral model contributed to its failure. A rapid increase in TITAN's price prompted large holders to sell, which triggered a negative feedback loop known as a "death spiral." TITAN's value fell to near zero, and IRON lost its dollar peg. The collapse resulted in an estimated $2 billion in losses and is widely cited as the first major DeFi "bank run."
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