acala dollar: Deja vu for stablecoins? This token tanks 99% post hacker attack

Synopsis

History repeated itself as the Polkadot-based decentralized finance (DeFi) platform Acala’s native stablecoin, Acala Dollar (aUSD), lost its parity, plummeting 99 per cent and its value was reduced to some fractions of a cent.However, this time, it was a hacking attack that led to this steep fall

The crypto market got a sense of deja-vu after another stablecoin erased almost its entire wealth in just a matter of hours.

History repeated itself as the Polkadot-based decentralized finance (DeFi) platform Acala’s native stablecoin, Acala Dollar (aUSD), lost its parity, plummeting 99 per cent and its value was reduced to some fractions of a cent.

However, this time, it was a hacking attack that led to this steep fall. aUSD was under pressure after hackers exploited a bug in a newly deployed liquidity pool to mint 1.28 billion tokens.

The infamous depegging of Terra Foundations stablecoin is not an old legend for crypto investors, which wiped out about $30 billion from investors kitty in merely 100 hours.

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View Details »According to the media reports, Acala developers said the bug was caused by a misconfiguration of the iBTC/aUSD liquidity pool shortly after it went live on Sunday.

A liquidity pool is a digital pile of cryptocurrency locked in a smart contract, which results in creating liquidity for faster transactions on decentralized exchanges (DEX) and DeFi protocols.

After noticing the exploit, the Acala team disabled the transfer functionality of the ‘erroneously minted aUSD’ remaining on the Acala parachain.

Parachains refer to custom, project-specific blockchains that are integrated within the Polkadot and Kusama networks and can be customized for any number of use cases.

Market experts said that the DeFi ecosystem needs to prioritize security over yields to ensure mass adoption of defi products.

Sharat Chandra, Vice President – Research and Strategy Vice President, EarthID said that DeFi hacks, code-exploits and cross-chain bridge attacks have only marred the decentralised finance story.

“Acala, hailed as the defi hub for Polkadot , succumbed to perils of misconfiguration of the liquidity pool. Security hacks like these will further embolden the decentralization illusion narrative,” he added.

Acala is the 2840th largest crypto token but its actual marketcap and circulating supply could not be ascertained by Coinmarketcap. Its supply is not available either, but its volume plunged 99 per cent to little more than $3 million.

Though the total loss of wealth could not be calculated exactly, some sources on twitter estimated a loss of up to $10 million. However, Acala developers are attempting to resolve the minting error and try to restore aUSD peg.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)

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    Updated: 08/16/2022 — 19:00