Paradex performs system reset after database bug triggers massive liquidation

Paradex, a decentralized derivatives trading platform, experienced a serious outage on January 19 that resulted in unexpected liquidations of hundreds of user positions. The incident was triggered by a technical error during a database upgrade process that lasted for 30 minutes. The platform has now announced a compensation plan of $650,000 for 200 affected users.

Database Maintenance Bug Causes Chain Reaction

During a scheduled maintenance operation, Paradex’s system encountered a race condition that caused corrupted data to be stored in the cloud and then published to Paradex Chain. This created inaccurate price information across the network, leading to incorrect funding calculations. According to PANews, this corrupted data spread to various components of the trading system.

Funding Index Reset Causes Layered Liquidations

The most severe impact occurred when the market funding index was reset to zero, creating artificial volatility that triggered abnormal gains and losses on user positions. This domino effect activated automatic liquidations across multiple trading markets, resulting in significant losses for traders holding leveraged positions. This condition persisted until the platform identified the root cause of the issue.

Platform Recovery and User Compensation

In a swift response, Paradex temporarily halted platform access, canceled all open orders except for take-profit and stop-loss orders to prevent further losses. The team then performed a blockchain reset using a backup snapshot taken before the maintenance window began, restoring the system to a stable state. Paradex is committed to returning $650,000 to the 200 affected users, demonstrating the platform’s responsibility for user asset security while also enhancing trust in its risk protection mechanisms.