Hackers took advantage of a flaw in the liquidity pool of the decentralized finance (DeFi) platform Acala, which is based in Polkadot, and caused its aUSD stablecoin to fall by 99%. This caused the list of not-so-stable stablecoins to gain a new entry.
According to data provided by CoinGecko, the value of the stablecoin dropped to as low as $0.009 in the wee morning of Monday morning after it was no longer pegged to the dollar.
CoinGecko indicates that the stablecoin continues to trade at $0.009, while CoinMarketCap recorded a low of $0.58 and suggests that aUSD has slowly climbed up to $0.93, but it has not yet reclaimed its dollar peg. CoinMarketCap documented a drop of $0.58 and suggests that aUSD has climbed back up to $0.91, but it has not yet reclaimed its dollar peg. CoinGecko suggests that the stablecoin persists in trading at $0.009,
The Acala Network claimed in a tweet that the unexpected flood of coins caused the stablecoin to depeg in a matter of minutes due to a “misconfiguration” of its newly-launched iBTC/aUSD liquidity pool. Hackers could mint 1.28 billion aUSD because of the “misconfiguration.”
We have identified the issue as a misconfiguration of the iBTC/aUSD liquidity pool (which went live earlier today) that resulted in error mints of a significant amount of aUSD
1/— Acala (@AcalaNetwork) August 14, 2022
iBTC is an inverse synthesized Bitcoin token that could be used on DeFi platforms and may be traded with aUSD on Acala. iBTC was created by combining Bitcoin with a different cryptocurrency.
As a result of an emergency vote for network governance, Acala halted all network trades. The team is going to begin on-chain tracing, and they have asked anyone who “inadvertently minted aUSD or swapped tokens from such aUSD that are not on Acala” to send the coins back to the addresses that were tweeted.
After further investigation, Acala determined that the problem had been resolved and stated,
“The misconfiguration has since been addressed and wallet addresses that got the erroneously generated aUSD have been identified.”
If you are a whitehat/recipient of errorneously minted aUSD or swapped token from these aUSD that are not on Acala, please transfer them to addresses below👇
On Polkadot: 13YMK2eYoAvStnzReuxBjMrAvPXmmdsURwZvc62PrdXimbNy
On Moonbeam: 0x7369626cd0070000000000000000000000000000
5/— Acala (@AcalaNetwork) August 14, 2022
According to CoinMarketCap, the price of ACA, Acala’s native token, has dropped by more than 6% since the beginning of the day and is currently trading at $0.27.
Problems with stablecoins
The Acala USD (aUSD) has become the latest stablecoin to experience a significant depeg from its underlying asset.
In May, the failure of Terra’s algorithmic stablecoin UST caused a loss of value equivalent to billions of dollars in a matter of days, which drew the attention of regulatory authorities all over the world. Acala’s aUSD is not an algorithmic stablecoin as UST is; rather, it promises to be multi-collateralized and supported by assets such as DOT, KSM, ACA, KAR, BTC, and ETH. This is in contrast to UST, which is an algorithmic stablecoin.
The collapse of Terra’s UST in May caused other stablecoins, notably the hybrid algorithmic stablecoin DEI, which now trades for less than 20 cents, to drop from its dollar pegs. Even the most widely used stablecoin in the world, Tether, was not immune to the infection and experienced a price decrease to as low as $0.95 before recovering.