Acala Stablecoin aUSD Collapses After Parachain Exploit

Key Takeaways

On Sunday, Polkadot’s DeFi Hub Acala Community suffered an exploit that noticed its native over-collateralized stablecoin aUSD plummet to zero.
The exploit was as a consequence of a “misconfiguration” situation within the newly launched iBTC/aUSD liquidity pool that allowed customers to mint limitless aUSD from skinny air.
After the incident, Acala instantly halted swaps and cross-chain transfers, leaving the exploiters caught with round 99% of the erroneously minted aUSD on the parachain.

Acala shortly put the community in upkeep mode, pausing on-chain swaps, Polkadot cross-chain communications, and oracle worth feeds to maintain the stolen funds from leaving the parachain.

Acala USD Depegs

Acala Community’s native stablecoin, Acala USD (aUSD), has collapsed to zero.

We’ve recognized the difficulty as a misconfiguration of the iBTC/aUSD liquidity pool (which went reside earlier at this time) that resulted in error mints of a big quantity of aUSD
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— Acala (@AcalaNetwork) August 14, 2022

On Sunday, Polkadot’s decentralized finance hub, Acala Community, suffered a extreme exploit that noticed its native stablecoin aUSD collapse from its focused $1 peg to successfully zero. “We’ve recognized the difficulty as a misconfiguration of the iBTC/aUSD liquidity pool (which went reside earlier at this time) that resulted in error mints of a big quantity of aUSD,” Acala stated yesterday on Twitter.

Based on on-chain knowledge, one hacker erroneously minted round 1.28 billion aUSD tokens after which swapped a small fraction for Acala’s native token ACA and 4 different tokens. Shortly after the incident, Acala put the parachain in upkeep mode and paused swaps, cross-chain transactions, and oracle worth feeds, leaving the hacker stranded with round 1.27 billion nugatory aUSD tokens on the community.

The on-chain knowledge additionally revealed that a number of different customers mimicked the unique hacker and exploited the bug for themselves, minting between 80 million to 25,000 aUSD every and stealing hundreds of {dollars} from the liquidity pool. The entire sum of the stolen funds is estimated to be lower than $10 million, not counting the worth misplaced in aUSD’s depeg.

Acala Community is an Ethereum-compatible Polkadot parachain—a modular and customizable unbiased chain constructed atop the Polkadot Relay Chain—that has self-branded as a specialised decentralized finance hub for Web3. Its ecosystem is centered across the MakerDAO-inspired, over-collateralized stablecoin Acala USD.

In March, Acala teamed up with Polkadot parachains to launch a $250 million ecosystem fund to assist builders driving demand for aUSD. Nevertheless, yesterday’s incident, which noticed the stablecoin collapse to just about zero, has raised severe issues in regards to the parachain’s path ahead locally.

Virtually 24 hours after the incident, most Acala community capabilities are frozen, with few updates from the challenge regarding its subsequent steps. Following the information, the community’s native token, ACA, fell by round 7%, from round $0.29 to $0.26.

Disclosure: On the time of writing, the writer of this piece owned ETH and several other different cryptocurrencies.

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