Another stablecoin has shown itself to be anything but stable after the Polkadot-based DeFi hub Acala Network was hacked on August 14, causing its stablecoin aUSD to suddenly lose around 99 percent of its value:
According to a Twitter thread posted by the Acala Network account, the rapid plunge in value of aUSD was caused by a “misconfiguration” of its iBTC/aUSD liquidity pool that resulted in the minting of over 1.2 billion of new aUSD.
Network Paused in Aftermath
In the aftermath of the breach, an urgent governance vote was taken to pause network activity while Acala Network developers tried to trace exactly what happened and come up with a strategy to resolve the situation:
Meanwhile functions including swap, xcm, honzon-related etc on Acala have been paused via urgent governance votes until further notice; the oracle pallet has also been paused so that users do not need to concern liquidations in between time.
— Acala (@AcalaNetwork) August 14, 2022
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Acala Network developers also called on any recipients of the erroneously minted aUSD to transfer them to addresses under their control so they could be burned and taken out of circulation, in the hope this might restore aUSD’s peg.
Erroneously Minted aUSD Returned and Burned
Following a hastily arranged community governance referendum on August 16, nearly 1.3 billion erroneously minted aUSD were returned to Acala Network’s Honzon protocol and burned:
The recently passed community governance referendum has now been executed.
— Acala (@AcalaNetwork) August 16, 2022
1,292,860,248 total erroneously minted aUSD have been returned to the honzon protocol and burned.
Details in thread below ⤵
While this step has taken many of the newly minted aUSD tokens out of circulation, it hasn’t yet had any impact on the stablecoin’s price – at the time of writing CoinMarketCap was reporting its value as US$0.01, still down 99 percent from its intended peg of US$1.
This depegging event follows on from the June collapse of the Terra-based stablecoin, UST, which triggered further failures of Terra-exposed DeFi projects including the comically named Magic Internet Money.
In the midst of the chaos sparked by Terra’s collapse, Tron founder Justin Sun decided to launch his own algorithmic stablecoin, USDD, which he subsequently had to prop up to the tune of US$2 billion just months after its launch when it too lost its dollar peg.