Acala (ACA) Saved From Disaster?

Acala (ACA) saved from disaster? The aUSD stablecoin almost regains parity with the dollar. In value, it was nothing less than the biggest hack in DeFi history: $1.2 billion. In fact, the fire was quickly contained and the aUSD, which had suffered a violent drop and lost up to 99% of its value, rose back above $0.91. The Polkadot ecosystem may blow after this heat stroke.

1.29 billion aUSD generated from nothing, then burned by Acala (ACA) after a governance vote

We reported to you yesterday, that the decentralized finance protocol (DeFi) Acala Network had been attacked on Sunday morning. Following a misconfiguration of its iBTC/aUSD liquidity pool, clever little guys had managed to generate aUSD ad infinitum, without providing cryptos as collateral!

In total, the attacker had time to work the money printing press to produce 1,292,860,248 aUSD tokens out of thin air. He even had time to transfer 1,288,561,129 aUSD to 16 different addresses on the Honzon protocol and left 4,299,119 on Acala's vulnerable pool.

Fortunately, the team reacted very quickly, managing to freeze the 16 wallets in question, then pausing the DeFi protocol. A governance vote was then urgently submitted to the community, concluding with an overwhelming Yes.

Motion submitted to the vote of the Acala community

After stalling over 99%, aUSD is back to almost $1

The most visible consequence was a return of the aUSD to a few points of parity. At the time of writing, the Acala USD is trading at just under 0.9000 USDT on the KuCoin exchange, the main crypto-exchange from which it derives its trading volumes.

If not totally out of the woods, then there was more fear of harm for the stablecoin that seemed to be the most promising in the Polkadot (DOT) ecosystem.

The year 2022 was a special year due to the collapse of UST, the stablecoin of the TerraLUNA ecosystem. UST was an algorithmic stablecoin, just like Acala's aUSD is.

To put it simply, each aUSD token issued on the market is backed by a certain volume of cryptocurrencies in order to guarantee its stability against the USD: DOT, ETH and BTC, ACA, and other stablecoins such as the USDT and USDC.

The 1.29 billion aUSD generated by the hacker was therefore generated without any collateral being provided. Fortunately, their freeze on the Honzon protocol – the gambit protocol for the stablecoin – prevented the influx of these unsecured aUSDs into the market.

aUSD back to $0.8999

Acala Network's gel didn't just make people happy

Strong supporters of decentralization have not failed to express reservations about Acala's decision to pause the DeFi protocol and freeze funds at the hacker's address.

Acala presented itself as a “  cross-chain liquidity hub that issues the stablecoin aUSD based on the Polkadot blockchain”. aUSD was billed as “  a censorship-resistant cryptographic stablecoin.” 

As for iBTC, which is a component of the story, it is a form of Wrapped Bitcoin (wBTC) that can be used in Polkadot's DeFi protocols.

A posteriori, several users have therefore pointed out all the irony of Acala's assertions, in the official Discord channel of the project:

"If Acala holds such decision-making power and in a centralized way, is it really DeFi?"

Previous or not, the intervention of the Acala teams is still in progress, even if the burn of the assets produced by the hack has already been burned.

The attack on the Acala protocol is the second in a week for DeFi.

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