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Polkadot Stablecoin Alpaca USD (AUSD) Depegs from Dollar

2022 was the year of the broken stablecoins. A multitude of dollar-pegged crypto assets were depegged from this year's dollar value....
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Photo by Nicholas Cappello

2022 was the year of the broken stablecoins. A multitude of dollar-pegged crypto assets were depegged from this year’s dollar value. The Polkadot-based stablecoin Alpaca USD (AUSD), fell below one penny US on August 14. However, it rebounded to $0.95 just hours later. According to reports, the Acala protocol was compromised by an attacker who managed to make 1.2 billion AUSD.

A number of stablecoins, including USDT and USDC, have had a terrible year when it comes to holding their U.S. dollars value. The depegging and renaming of Terra USD (UST) caused the Terra ecosystem to collapse, with more than $40 billion of crypto currency value. Stablecoins such as Waves’ neutrino USDN (USDN), Abracadabra’s magic internet money, (MIM) and Tron’s USDD fell below the $1 mark.

Terra’s USTC has never recovered the $1 peg. However, USDN and MIM are now swapping $0.99 each coin on August 14, 2022. The peg for the Polkadot-based stablecoin Alpaca USD (AUSD), was lost on the same day. According to coinmarketcap.com, the lowest price for a unit of any type was $0.006383 on Sunday. At 3:15 PM (EST), AUSD’s prices had fallen back to $0.95, but it then dropped to $0.01165 in no time.

The issue was raised by Polkadot’s Acala Network shortly before the huge fluctuations in AUSD value. “We have observed a configuration problem of the Honzon protocol that affects AUSD,” Acala Network’s official Twitter page wrote. “We have voted to suspend operations on Acala while we investigate the problem and address it. The team said that they would report back once normal network operations resume,”

Changpeng Zhao, Binance CEO (CZ), also tweeted regarding the AUSD situation. CZ wrote:

ACALA protocol is currently insecure. Apparently there was a bug within the iBTC/AUSD pool. The attacker’s wallet now contains over a billion dollars. We are monitoring. (AUSD isn’t listed on Binance).

Acala Protocol: “Misconfiguration” Resulted In “Error Mints of Significant Amounts of AUSD”
A series of reports allege that a hacker had managed to create 1.2 billion AUSD. This ultimately led to the stablecoin’s depegging. Acala confirmed hours later that large amounts of AUSD were produced by an error. The issue was caused by a misconfiguration in the iBTC/AUSD liquidity pools (which went live earlier this day) and resulted error minting of large amounts of AUSD,” team stated Sunday.

Acala states that the “misconfiguration” has been fixed and that the team was able to identify wallets that had received the incorrectly minted AUSD tokens. Acala reported this news at 7:59 AM (EST) and said that an investigation was ongoing.

The team stated that while the Acala community collective governance decides on the resolution of the error, these erroneously issued AUSD still on Acala parachain together with these swapped Acala Parachain native tokens were transfer disabled. According to the AUSD market data, AUSD’s U.S. dollars value is still $0.01159 per coin at 4:00 PM EST.

Felipe Rodriguez

Felipe Rodriguez

Felipe states he has super powers, some argue that case but he does come up with some very clear predictions. Felipe is based in the US and frequently travels to Brazil where he was born. He is a journalist of the future and has a portfolio of crypto projects he has worked with. Felipe always says "The future doesn't scare me as much as the past, crypto is here to stay but only time will tell where it will take us".
Felipe Rodriguez

Felipe Rodriguez

Felipe states he has super powers, some argue that case but he does come up with some very clear predictions. Felipe is based in the US and frequently travels to Brazil where he was born. He is a journalist of the future and has a portfolio of crypto projects he has worked with. Felipe always says "The future doesn't scare me as much as the past, crypto is here to stay but only time will tell where it will take us".

© 2022 The Daily Encrypt. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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