Acala Dollar (aUSD) Post Mortem Analysis: Hack Or Bug?

2 years ago · Updated 2 years ago

✍️ 17 August, 2022 - 16:40 👤 Editor: Jakub Motyka

aUSD, Acala's decentralized stablecoin, lost its peg earlier in the week.
The post-mortem report reveals new data on the sudden issuance of more than 1.2 billion unbacked tokens.

What happened to Acala? Can aUSD be recovered?

The algorithmic stablecoin aUSD, native to the Acala Network ecosystem belonging to Polkadot, lost its peg to the dollar earlier this week due to a possible hack. This, after the sudden issuance of 1,200 tokens, which lowered its price by 99%. At first a possible hack was theorized, but post-mortem analysis revealed new data about the incident.

Remember that Acala Network is an important piece of the Polkadot ecosystem, as it offers a complete decentralized finance platform within the network. From it, users can swap, stake, yield farm and borrow, which is why aUSD is an essential gear for its operation. In other words, the fall of the stablecoin affects both Acala users and Polkadot users in general.

Was The "Hack" The Reason For The Decoupling Of Acala Dollar (aUSD)?

After the sudden issuance of 1.2 billion aUSD, the Acala team took immediate action. Under the premise of a possible hack, they proceeded to stop all network operations. However, after doing the pertinent investigations, the programmers conclude that it was all a programming error. The Claim_rewards code within the iBTC/aUSD liquidity pool contract, which had just been implemented, allowed a user to mint more aUSD than they should have.

Later, the user who managed to generate 1,200 aUSD contacted the technical team, clarifying that it was not an attack or something done on purpose. Thanks to the immediate action of the Acala development team, all of the mistakenly issued aUSD remained in-network. This made it possible to propose a governance referendum that plans to burn the 1,292,860,248 aUSD minted, in order to get the stablecoin back into good working order.

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