The aUSD Stablecoin is the latest to suffer a setback following a hack into the Acala Network resulting in a 99% drop in its value.
Hacking of Acala Network
On Sunday, hackers infiltrated the Polkadot-based DeFi network Acala and issued approximately 1.2 billion $aUSD tokens. As a result, the network’s native Stablecoin, Acala Dollar, or aUSD, lost its dollar peg and lost 99% of its value. In the early hours of Sunday, August 14, the coin fell to $0.58 in just a few hours.
The exploit was discovered by Twitter user 0xTaylor_, who revealed that the hackers took advantage of a flaw in the iBTC/AUSD pool.
The Acala Network quickly acknowledged the attack. The team’s official Twitter account tweeted: We discovered a Horizon protocol configuration issue that affects aUSD. We are passing an emergency resolution to halt operations on Acala while we investigate and alleviate the problem. We will provide an update as soon as we resume normal network operations.
Team Freezes Funds, Maintenance Continues
Since then, the team has been working on the issue while also keeping the Twitter community updated. The Acala team was able to identify the issue in the iBTC/AUSD pool that resulted in error mints of a significant amount of aUSD shortly after putting the network in maintenance mode and blocking transfers. The team informed the community that the misconfiguration had been corrected and that the wallets that received the incorrectly minted aUSD had been identified.
The team then updated that 99% of the erroneously minted aUSD is still on the Acala parachain, with only a small 1% converted to ACA and other tokens on the parachain. The team also asked whitehat token holders and recipients to return the erroneously transferred tokens to specific wallet addresses.
Is Acala Definitely Decentralized?
In an unusual turn of events, certain community members, particularly hardcore DeFi-heads, have questioned the protocol’s levels of Decentralization in light of its ability to freeze funds and halt operations so quickly. When it attempted to boost the aUSD Stablecoin in March 2022, the network emphasized its Decentralization. Since it was claimed that aUSD is a censorship-resistant Stablecoin, the question of why the decision to freeze funds was not taken to governance remains unanswered. Could the protocol still claim to be decentralized after Acala decided to freeze assets centrally?
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