What should have been a routine trade on the Cardano blockchain turned into a nightmare this weekend costing one unlucky user about $6 million.

On Sunday, the unidentified user attempted to swap 14.4 million ADA ($0.49) tokens worth just under $7 million for USDA, a stablecoin designed to trade at the value of the US dollar.

But instead of getting the expected $7 million USDA, the trader only received around $847,000 worth, onchain records show.

The reason? Low liquidity on the exchange where the user placed the trade, according to ZachXBT, a pseudonymous onchain sleuth who first identified the unfortunate transaction.

In low-liquidity pools on decentralised exchanges, trades can cause large price swings and make a user’s final execution price much different — and usually worse — than what they expected. This effect is usually referred to as slippage.

Slippage has been a perennial issue in DeFi. Early last year, a boom in trading of low-liquidity memecoins caused more than half of all Solana transactions to fail in a one-month period due to slippage.

In addition to giving the user a raw deal, the lopsided trade briefly pushed up the value of the dollar-pegged USDA to over $4.84 per token, per CoinGecko data.

The incident highlights the perils of using decentralised finance, where users maintain sole control over their funds in exchange for fewer guardrails to protect them from mistakes.

User error

Despite making a $6 million error, the user did not appear to be new to crypto.

Onchain records show the wallet had held their stash of ADA tokens for over five years before losing the majority of their value through the bungled trade.

That transaction was the wallet’s first time interacting with a DeFi protocol on Cardano, however.

USDA is a Cardano-native stablecoin backed by US dollars and dollar-equivalent assets, such as short-term US government bonds. It is a joint project between Encryptus, Cardano’s business arm Emurgo, and BitGo Trust.

The stablecoin began trading on Cardano decentralised exchange Minswap in March. Since then, users have been slow to adopt it. Data on Minswap shows the ADA-USDA pool only handles around $30,000 of trading volume daily.

The lack of volume is reflected in the asset’s liquidity. It’s not clear how much liquidity the pool held before the user sent their trade, but the pool currently holds around $963,000 USDA and an equivalent value of ADA tokens.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.