The last couple of days have been particularly challenging for the Acala Network after the project’s stablecoin, aUSD depegged by nearly 99%. The cause of the aUSD depegged was attributed to a hack, which saw the hacker indiscriminately minting over a billion aUSD tokens.
In response to the hack, the company has now paused the hacker’s wallet. But the damage has already been done, with experts questioning the company’s claim of being decentralized.
The hack, which happened on August 14, 2022, saw the hacker exploit a bug on the iBTC/aUSD liquidity pool to mint 1.2 billion aUSD tokens without collateral. The hack, though successful, crashed the USD pegged stablecoin to a cent. The Acala Network team has responded to the security exploit by freezing the erroneously minted tokens and placing the network in maintenance mode.
As part of its move to return normalcy, the Acala team has also halted other features like swaps, oracle pallet price feeds, and xcm (a cross-chain communication on DOT). Although the company’s response, which involved freezing the funds in the hacker’s wallet and placing the network in maintenance mode, seemed like the right thing to do in such a situation, many champions of decentralization have cried foul.
The argument for decentralization and the reality on ground
Acala, a cross-chain DeFi hub powered by Polkadot blockchain, issues a stablecoin aUSD. Before the hack, the company claimed its stablecoin was censorship resistant. But with the latest hack, community members are questioning the company’s claim of its stablecoin being censorship resistant, seeing how swiftly the company froze the hacker’s wallet. Some users added that for the company to implement such action, it has to go through governance.
While a member from the Acala Network Discord channel suggested rolling back the chain, a move that will help reverse the token mints entirely, another member challenged the suggestion, adding that such a move would set a dangerous precedent.
Despite confirming that the bug has been resolved, the Acala Network is still in maintenance mode. Meanwhile, the erroneously minted tokens are still on the Acala Network, so there is a possibility that the tokens can be retrieved if the community votes to do so.