Over a billion aUSD stablecoins were created out of thin air during the Acala hack, but now community members are puzzling over how a decentralized system would handle the clean-up.
Concerns regarding the decentralized nature of the Acala Network’s aUSD stablecoin were raised over the weekend when it underperformed by over 99 percent and the Acala team was compelled to suspend a hacker’s wallet.
On August 14, a hacker exploited a flaw in the iBTC/aUSD liquidity pool, causing 1.2 billion aUSD to be issued without any security. In response, the Acala team put the network in maintenance mode and froze the incorrectly created tokens, crashing the USD-pegged stablecoin to a cent.
Other functions like swaps, xcm (cross-chain communications on Polkadot), and the Oracle pallet pricing feeds were also disabled until “further notice.”
Decentralization advocates have expressed outrage despite the fact that the decision to put the network in maintenance mode and freeze the hacker’s wallet may have been made to safeguard users and the network from further harm.
The aUSD stablecoin is issued by Acala, a cross-chain decentralized finance (DeFi) hub based on the Polkadot (DOT) network. Acala describes aUSD, a stablecoin backed by cryptocurrency, as being censorship-resistant. Wrapped Bitcoin (BTC) is known as iBTC, and it can be utilized with DeFi protocols.
Since the protocol quickly frozen funds, community members have pointed out the irony of Acala’s claims regarding the censorship-resistance of the aUSD. Gr33nHatt3R.dot noted on Twitter on August 14 that “decentralized finance” would require decisions to go to governance.”
“If Acala centrally controls that decision is this really DeFi?”
Usafmike, a participant in the project’s Discord channel, first suggested rolling back the chain to stop the token mints altogether, but skylordafk.dot, another participant, objected, claiming that this would “create a detrimental precedent.”
The team acknowledged that the flaw had been repaired, however, the network was still in maintenance mode at the time of writing in order to prevent any token transfers. The wallets that mistakenly acquired aUSD have been discovered, and since 99 percent of them are still on Acala, there is a chance that the community may vote to recover them.
The Acala vulnerability is the second significant one in a week, following an assault on Curve Finance’s (CRV) front end on August 9 that persuaded users to authorize a malicious contract. The issue with Acala is different from the one with Curve since its smart contracts’ pools were not corrupted when users dealt with them directly.
The most prominent stablecoin to lose its peg in recent months was Terra USD (UST), which has now been rebranded to Terra Classic USD. aUSD is the most recent stablecoin to do so (USTC). Tether (USDT) and Dei (DEI) are two other prominent depegs.
