After the Acala vulnerability, network and token freezing raises concerns

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Last Updated on August 15, 2022 by Bitfinsider

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 mess.

Concerns regarding the decentralized nature of the Acala Network’s aUSD stablecoin were raised over the weekend when it underperformed by over 99% and the Acala team was compelled to suspend a hacker’s wallet.

A hacker exploited a flaw in the iBTC/aUSD liquidity pool on Sunday, causing 1.2 billion aUSD to be created without any security deposit. The Acala team responded to this incident by putting the network in maintenance mode and freezing the incorrectly created tokens, which caused the US dollar-pegged stablecoin to plummet to $0.01.

Source: Twitter

Other functions including swaps, xcm (cross-chain communications on Polkadot), and the Oracle pallet pricing feeds were also suspended 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 network. Acala describes aUSD, a stablecoin backed by cryptocurrency, as being censorship-resistant. Wrapped Bitcoin, or wBTC, comes in the form of iBTC and is compatible with DeFi protocols.

Since the protocol quickly frozen funds, community members have pointed out the absurdity of Acala’s comments about the aUSD’s resistance to censorship.

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 were mistakenly issued aUSD have been located, and since 99% of them were still on Acala, there is a chance that the community would vote to recover them.

The Acala vulnerability is the second significant one in a week, following an assault on Curve Finance‘s front end on August 9 that persuaded users to approve a malicious contract. Acala’s issue is different from Curve’s because the latter’s pools were safe because customers who interacted with its smart contracts directly had no problems.

The most well-known stablecoin to lose its peg recently was TerraUSD (UST), which has now been rebranded to TerraUSD Classic. This was followed by aUSD in recent months (USTC). Tether (USDT) and Dei are two other prominent depegs (DEI).


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Hardware wallets are safe and secure devices that can be used offline. They keep your cryptocurrency offline, making it impossible for you to be hacked. To find out more on the leading hardware wallets, you may view our reviews here: Ledger & Trezor
Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

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