The Acala network’s stablecoin aUSD crashed by more than 99% over the weekend, forcing the Acala team to put a hacker’s wallet on hold, raising questions about its claim to be decentralized..
On Sunday, a hacker took advantage from a failure in the iBTC/aUSD liquidity pool that caused 1.2 billion aUSD to be minted without collateral. This event caused the US dollar-pegged stablecoin to drop to one cent, and in response, the Acala team froze the wrongly minted tokens, putting the network in maintenance mode.
The move also halted other features such as swaps, xcm (cross-chain communications in Polkadot), and oracle palette price feeds until “further notice.”.
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
— Acala (@AcalaNetwork) August 14, 2022
We have identified the issue as a misconfiguration of the iBTC/aUSD liquidity pool (going live today) that has caused a significant amount of aUSD to be minted by mistake.
While the move to put the network into maintenance mode and freeze the funds in the hacker’s wallet may have been intended to protect users and the network from further harm, decentralization advocates have complained..
Acala is a cross-chain decentralized finance (DeFi) center that issues the aUSD stablecoin based on the Polkadot blockchain. aUSD is a cryptocurrency-backed stablecoin that Acala says is censorship resistant. iBTC is a form of Wrapped Bitcoin (wBTC), which can be used in DeFi protocols.
Members of the community have noted the irony of Acala’s claims about resisting aUSD’s censorship, since the protocol froze funds so quickly. Twitter user Gr33nHatt3R.dot he pointed on August 14 that the decisions “they would have to go to government to be ‘decentralized’ finance:”
“If Acala centrally controls that decision is this really DeFi?”
If Acala centrally controls that decision, is this really DeFi?
A member of the project’s Discord channel, usafmike, proposed rolling back the chain to reverse token mintages altogether, but was challenged by skylordafk.dot, another member who said such an action would “set a damaging precedent”.
At the time of writing, the network was still in maintenance mode to block all token transfers, but the team confirmed that the bug had been fixed.. The wallets that received erroneously minted aUSD have been identified, and 99% of them were still in Acala, leaving the possibility that they could be recovered by the community if they vote to do so.
The Acala exploit is the second biggest in a week, as Curve Finance suffered an attack on its front end on August 9, which directed users to approve a malicious contract. Acala’s issue differs from Curve’s in that Curve’s pools were not compromised, as users who directly interacted with their smart contracts did not experience any issues.
aUSD is the latest stablecoin to lose its peg in recent months, notably starting with TerraUSD (UST) in May.which has since been rebranded as TerraUSD Classic (USTC). Other notable decouplings include Tether (USDT) and Dei (DEI).
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