Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policies before making any financial decisions.
Stablecoin Acala USD (aUSD) is almost back on peg after its 99% drop over the weekend, according to Coinmarketcap. Acala’s abrupt fall came after hackers exploited a flaw in a new liquidity pool and minted more than 1.2 billion tokens, forcing Acala Network’s team to freeze the hacker’s wallet.
aUSD crashed 99% after a liquidity pool exploit
Polkadot-powered stablecoin Acala USD (aUSD) has almost regained its 1:1 peg to the US dollar after falling 99% over the weekend on an exploit. The drop came after hackers exploited a flaw in iBTC, a fresh pool of liquidity, to mint 1.28 billion aUSD tokens.
The hack, which brought the price of aUSD down to just one cent, forced Acala developers to freeze the newly minted tokens by putting the Acala network into maintenance mode. The network’s team also paused other features, including swaps, Polkadot-based cross-chain communications (XCM), and Oracle pallet price feeds, among others.
Acala Dollar to USD chart, source:CoinMarketCap
The frozen wallet, believed to belong to the hacker, reportedly still contains $1.28 billion. Acala’s team has urged security hackers to return the stolen tokens to Polkadot or Moonbeam addresses.
aUSD was launched in February 2022 and maintained its soft peg to the US dollar until the exploit. After the hack, the token’s price fell from $1.03 to $0.009 per token, and while the price rallied to around $0.9 per token, the event has raised concerns about decentralization.
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The Year of Crypto Exploits
Acala Network is a cross-chain decentralized finance (DeFi) platform and is behind the Polkadot-powered aUSD stablecoin. The Acala team claims the token is censorship-resistant.
Acala’s exploit was the second major hack in a week after the Curve Finance frontend was attacked on August 9, tricking users into approving a malicious contract. However, unlike Acala’s, Curve Finance’s liquidity pools have not been exhausted.
This year, the crypto space has faced extraordinary challenges, including a sharp fall in prices amid record-high inflation and tightening monetary policies from central banks, the collapse of algorithmic stablecoins TerraUSD (UST) and LUNA, and several major crypto firms such as Digital’s Voyager and Celsius Network’s bankruptcy. In addition to these headwinds, the industry has also been plagued by numerous hacks and exploits.
Last week, blockchain analytics firm Elliptic reported that a cross-chain bridge, RenBridge, was used to launder $540 million in crypto funds. Also, last week the US Treasury imposed sanctions on crypto mixer Tornado Cash, which the Treasury says has been used to launder $7 billion worth of crypto cash since its launch in 2019.
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About the author
Tim Fries is co-founder of The Tokenist. He holds a B.Sc. in mechanical engineering from the University of Michigan and an MBA from the University of Chicago Booth School of Business. Tim was a senior associate on the investment team of RW Baird’s US private equity practice and is also a co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
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