- Acala reported a configuration issue on its stablecoin protocol
- The crash comes after hackers minted 1.3 billion of the tokens for free
- Acala network acts as an Ethereum-compatible Polkadot para chain.
The Polkadot-powered stablecoin, Acala dollar (aUSD) crashed to below 10 cents on Sunday. The crash comes after hackers minted 1.3 billion of the tokens for free.
Acala, the stablecoin’s issuing network, voted to suspend functionality to address the situation.
Acala’s hack
Acala, through a tweet on Sunday, reported that it noticed a configuration issue on its stablecoin protocol. The stablecoin protocol, Horizon, directly affects how Acala USD operates.
As one of the first Polkadot Parachains, Acala styles itself as a DeFi hub. The parachain supports Polkadot’s network.
Acala recently launched a yield-bearing liquidity pool for Acala USD. It also did the same for a form of wrapped bitcoin. The pool contained a bug dictating how the pool pays out rewards.
The on-chain observers discovered that hackers indeed exploited the flaw and managed to mint around 1.3 billion Acala USD. One attacker’s wallet held about 1.27 billion Acala USD.
The incident hence resulted in Acala USD crashing as low as $0.07 on KuCoin. The move echoed TerraUSD’s collapse in May. Prior to the incident, the Acala USD held its soft peg since its launch in February.
Understanding the Acala network
However, Acala USD rebounded quickly and currently trades for more than $0.90. blockchain explorer indicates that Acala USD official supply currently caps at 4.8 million tokens.
Notably, Acala’s Horizon protocol manages the stablecoin based on various risk management algorithms. The token value is also derived from a basket of reserve assets. The main reserve assets entail the Polkadot ecosystem tokens.
Users mint Acala USD by sending certain digital assets to the protocol. This enables people to transact, trade and facilitate services using Acala USD without price volatility.
Acala network acts as an Ethereum-compatible Polkadot parachain. A parachain represents a modular and customizable independent chain built atop the Polkadot Relay chain. The relay chain is self-branded as a specialized decentralized finance hub for web3.
Its ecosystem remains centered around the MakerDAO-inspired, over-collateralized stablecoin, Acala USD.
Stolen tokens
Acala labeled the snafu a ‘misconfiguration’. Acala claimed that it rectified the problem the same day. The platform insisted that it identified wallet addresses that received the erroneously minted Acala USD.
The network itself however remains quiet on the number of tokens involved. The remaining illicit Acala USD stays locked until a collective governance decision applies.
In October 2021, Polkadot’s Kusama similarly voted to manage a security vulnerability. The vulnerability at the time also involved stolen tokens. Both Acala network and Co-Founder Bette Cheu refused to comment on the same.
Acala ACA shed about 13% since the attack. Binance CEO Changpeng Zhao announced in a tweet that the exchange continues to monitor the situation. Binance however fails to list Acala USD but does not support ACA trade.
Almost 24 hours after the incident, most Acala network functions got frozen. Following the news, the network’s native token, ACA, fell by around 7%. The price ranges from around $0.29 to $0.26.
