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 clean up.
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 $.01.
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 DeFi hub based on the Polkadot network. Acala describes aUSD, a stablecoin backed by crypto, 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. Gr33nHatt3R.dot noted on Twitter on August 14 that in order for money to be “decentralized,” choices “would have to go to governance: “If Acala centrally controls that decision is this really DeFi?”
Usafmike, a participant in the project’s Discord channel, first suggested reversing the token mints entirely by rolling back the chain, but skylordafk.dot, another participant, objected, claiming that this would “create a detrimental precedent.”
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.