𝐈𝐧𝐝𝐢𝐠𝐨 𝐏𝐫𝐨𝐭𝐨𝐜𝐨𝐥 — 𝐑𝐞𝐬𝐢𝐥𝐢𝐞𝐧𝐜𝐲 𝐀𝐦𝐢𝐝𝐬𝐭 𝐕𝐨𝐥𝐚𝐭𝐢𝐥𝐢𝐭𝐲

𝐅𝐥𝐚𝐬𝐡 𝐂𝐫𝐚𝐬𝐡 𝐏𝐨𝐬𝐭-𝐌𝐨𝐫𝐭𝐞𝐦 (𝐎𝐜𝐭𝐨𝐛𝐞𝐫 𝟏𝟎, 𝟐𝟎𝟐𝟓)

On October 10, 2025, the crypto markets experienced the sharpest flash crash in recent history, with nearly $20 billion in liquidations occurring across the industry within minutes. Despite the extreme volatility and network congestion that followed, Indigo Protocol remained operational and resilient throughout the event.

This post-mortem provides a transparent look at how Indigo handled the event, what went well, and what we’ve learned.

Indigo’s price oracle currently sources data from Chainlink’s Arbitrum deployment. This data is fetched, verified, and then published on Cardano to ensure on-chain pricing for all iAssets (iUSD, iBTC, iETH, and iSOL).

During the flash crash, the ADA/USD oracle feed reached a temporary low of ~$0.45, recorded in Arbitrum block 388186765.

This low price persisted on the Cardano network for roughly two minutes (≈131 slots) before returning to over $0.60.

When market volatility spiked, several CDPs (Collateralized Debt Positions) across Indigo became undercollateralized. The Indigo liquidation bot, which monitors oracle updates and initiates liquidations, began processing these CDPs as it normally does, and as expected.

Here’s a breakdown of the collateral absorbed (in ADA) and iAssets burned during that window:

$iUSD: absorbed 22,641 ADA in collateral; 13,617 iUSD were burned.
$iBTC: absorbed 204,465 ADA; 1.136 iBTC were burned.
$iETH: absorbed 150,528 ADA; 24.303 iETH were burned.
$iSOL: absorbed 50 ADA; 0.14 iSOL were burned.

At the same time that the liquidations were taking place, the Cardano network was experiencing unusually high load. With blocks nearly full for an extended period, transaction propagation slowed, leading to longer mempool times for pending transactions.

The Indigo liquidation bot uses transaction chaining to process liquidations efficiently. However, due to the frequency of oracle updates during extreme volatility, new oracle transactions often entered the mempool before the previous transactions were confirmed. This means the bot occasionally tried acting on slightly outdated price data, reducing its ability to fully liquidate every at-risk CDP during the few-minute period where the oracle was reporting the temporary low ADA value.

𝐖𝐡𝐚𝐭 𝐖𝐞𝐧𝐭 𝐑𝐢𝐠𝐡𝐭

𝐎𝐫𝐚𝐜𝐥𝐞 𝐑𝐞𝐬𝐢𝐥𝐢𝐞𝐧𝐜𝐞: The oracle system continued to function without interruption, maintaining accurate price reflections from the external Chainlink feed.
Protocol Stability: No systemic failures occurred. The Protocol was operating as expected during the flash crash.
𝐓𝐫𝐚𝐧𝐬𝐩𝐚𝐫𝐞𝐧𝐜𝐲 𝐚𝐧𝐝 𝐃𝐚𝐭𝐚 𝐈𝐧𝐭𝐞𝐠𝐫𝐢𝐭𝐲: All price events and liquidations were verifiable on-chain.
𝐂𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐈𝐦𝐩𝐚𝐜𝐭: Only a small subset of CDPs were affected by incomplete liquidation due to the short duration of the crash.

𝐖𝐡𝐚𝐭 𝐖𝐞 𝐋𝐞𝐚𝐫𝐧𝐞𝐝

While Indigo handled the event well overall, we identified areas for improvement:

𝐋𝐢𝐪𝐮𝐢𝐝𝐚𝐭𝐢𝐨𝐧 𝐁𝐨𝐭 𝐄𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐜𝐲: We plan to improve how the liquidation bot interacts with rapidly updating oracle data to improve system response to high-frequency volatility.
𝐈𝐦𝐩𝐫𝐨𝐯𝐞𝐝 𝐋𝐢𝐪𝐮𝐢𝐝𝐚𝐭𝐢𝐨𝐧 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲: Exploring ways to adjust the bot’s liquidation strategy, for example, by batching transactions during network congestion.
𝐌𝐨𝐧𝐢𝐭𝐨𝐫𝐢𝐧𝐠 𝐚𝐧𝐝 𝐀𝐥𝐞𝐫𝐭𝐬: Enhancing real-time monitoring to detect mempool congestion and oracle–bot & liquidation-bot desynchronization faster.

Indigo’s resilience can be attributed to two core features of the protocol: Stability Pools and Redemptions. Stability Pools allow for a cushion of available liquidity for use in liquidations. The introduction of Indigo’s redemption feature, aka RMR (Redemption Margin Ratio), allowed for a more gradual redemption of positions that fell within the redeemable range as opposed to a larger liquidation event, as seen in prior historic volatile periods before the deployment of RMR.

The system as a whole will only improve over time as new and improved iterations of these features progress through development and are deployed on-chain.

Flash crashes are rare but valuable stress tests. Indigo’s performance on October 10th showed the robustness of the Indigo Protocol architecture and the effectiveness of on-chain transparency. Still, there are opportunities to make the system even more resilient under extreme conditions.

This event will be used as a catalyst to refine the Indigo infrastructure, ensuring that Indigo Protocol continues to lead in security, reliability, and transparency not only on Cardano but in the DeFi sector as a whole.