By Chris Hollingworth 
Nostra, a lending protocol operating on Starknet, recently made the decision to halt borrowing against two liquid staking tokens following the discovery of a significant issue with its price feeds. The decentralized finance (DeFi) protocol revealed that on March 24, inaccuracies in Nostra’s price feed led to an overestimation of the prices of xSTRK and sSTRK, two liquid staking derivatives tied to Starknet’s native STRK token. The reported prices were inflated to nearly three times the actual value of the tokens, as disclosed by Nostra in a post on the X platform.
The potential consequences of such inflated price feeds were highlighted by Nostra, stating that it could have triggered unnecessary liquidations of secure positions, resulting in users facing unwarranted liquidation risks. In response to this issue, the DeFi protocol took immediate action by suspending any further borrowing activities against xSTRK and sSTRK collateral deposits. Additionally, Nostra advised users with existing deposits of these tokens to withdraw their collateral promptly.
Acknowledging the limitations in their current setup, Nostra emphasized the absence of a secondary (fallback) oracle to support these assets, making it challenging to prevent similar incidents from happening in the future. The priority of the protocol remains safeguarding user funds, and with the absence of a fallback oracle, the perceived risks outweigh the benefits of continuing operations in the same manner.
Starknet, the underlying layer-2 scaling chain of Ethereum that Nostra operates on, launched its mainnet towards the end of 2021, according to data from Messari. With a total value locked (TVL) of around $575 million, as reported by L2Beat, Starknet has established itself as a significant player in the DeFi space. Nostra, one of the prominent DeFi projects on the chain, boasts a TVL of approximately $55 million, as indicated on its website.
Nostra functions by allowing users to deposit collateral in one token to borrow another token, with popular collateral options including Ether, STRK, USDC, and USDT stablecoins. STRK, designed by Starknet, can be staked in return for a share of the network’s fee revenues, as outlined in its documentation. Furthermore, xSTRK and sSTRK are liquid staking tokens issued by independent DeFi protocols Endur and Nimbura, respectively.
In light of these recent developments, it is crucial for stakeholders in the DeFi ecosystem to stay informed about potential risks associated with price feeds and collateral management on lending protocols like Nostra. As the industry continues to evolve, maintaining transparency and robust risk management practices will be paramount for the sustainable growth of decentralized finance.
(Source: Nostra)
