Defi Protocol’s Stablecoin Depegs After Exploit

2022 has seen a number of stablecoins breaks, as a myriad of them that were pegged to the US dollar ended up getting depegged from their value.

August 14th saw yet another stablecoin take a hit, as alpaca USD (AUSD), based on the Polkadot blockchain, drop in value below a US penny.

However, it did bounce back hours later to the $0.95 region. According to reports, the DeFi protocol Acala, which has issued the stablecoin had been compromised and 1.2 million AUSD had been stolen.

Bad year for stablecoins

Other than USDT, DAI, USDC, and a handful of other stablecoins, most of the ones available in the market have had a horrible year in terms of maintaining their peg to the US dollar.

It started with the terra USD (UST) that first depegged and caused the entire Terra ecosystem to crash, thereby wiping out more than $40 billion from the crypto market.

After this major implosion, there were other stablecoins, such as Tron’s USDD, Abrcadabra’s magic internet money (MIM), and neutrino USD (USDN) from Waves’ that also fell below the $1 threshold.

While Terra’s stablecoin never managed to regain its peg, the others were trading at a value of $0.99 on August 14th.

AUSD falls

But, on the same day, the Polkadot-based alpaca USD (AUSD) slipped below the $1 mark. According to the data from coinmarketcap.com, the stablecoin hit $0.006383 on Sunday.

The price did bounce back to $0.95, but it was not able to stay there for long and came down to $0.01165 in no time.

Just before the AUSD’s value began to fluctuate massively, the Acala Network had already tweeted about it.

The official Twitter page of the Acala Network stated that the Horizon protocol had a configuration issue that was affecting AUSD.

It said that they were pausing operations on the DeFi protocol so the issue could be investigated and mitigated.

The team said that they would issue a full report once they resumed their normal operations.

Other reports

There were also other reports, which said that a hacker had compromised the DeFi protocol and had managed to mint about 1.2 billion AUSD.

This ultimately resulted in the depegging of the stablecoin. Acala confirmed a couple of hours later that large amounts of the stablecoin had been minted due to an error.

According to the protocol, they had rectified the error and they had also identified the wallets that had received the AUSD tokens. It said that they were conducting an investigation.

The team also said that the AUSD tokens that had been minted due to the error had been transfer disabled.

Regardless of the news, the value of the AUSD stablecoin was still stuck at $0.01159, according to the data from coinmarketcap.com.

Not only has it been an awful year for stablecoins, but has also been a similar one for the decentralized finance (DeFi) space. A number of protocols have been exploited in this year and Acala has just turned out to be the latest one.