While some blockchain projects must deal with hackers, others, such as Alcala, need to deal directly with their developers. A few weeks back, a “human error” almost cost the project its life. Despite this, the problem was solved thanks to the cooperation of developers and the community.
Acala network announced on September 26 that it had reactivated its operations after recovering $2.970 million in USD from the $3.022 Million its team misprinted in August.
The community referendum on Stage 1 of the resuming Acala operations passed and has been implemented.
LPs can now choose to withdraw liquidity from Acala or unstake LP tokens. https://t.co/yzvOz7zwxT
— Acala (@AcalaNetwork September 26, 2022
Acala reports that the community voted to restart network operations after burning nearly all ($2.7 billion USD) of printed tokens.
A costly error
A report was published by The DeFi platform Acala on August 15 explaining how 3 billion of its USD stablecoins were incorrectly printed, leading to its immediate collapse. The price of aUSD dropped more than 99% to $0.01 per coin.
Summary below. 2nd batch trace results. 16 addresses claimed 3.022B USD error mints. Acala referendum #21 was set on fire at 1.292B. 16 Acala addresses still have 1.682B USD error mints in the iBTC/aUSD MP tokens after the incident. https://t.co/8MTBinhrVP
— Acala (@AcalaNetwork), August 17, 2022
The network had to suspend swap operations, inter-chain communication on Polkadot, and oracles due to the failure. After the error was fixed, parity with U.S. dollars was restored, the team stated that operations would resume “in a safe manner and gradually”.
“To contain the erroneously minted aUSD,” urgent governance votes were passed to pause horizon, xtoken, xcm transfer outside, EVM, non ACA token transfer and LDOT instant redeem.
The network was put into maintenance mode, freezing funds from users to recover unclaimed tokens. Later, the community voted to destroy any erroneously printed tokens. This helped to restore operations, despite the fact that aUSD is still at $0.77, far below the $1 reference.
lcala and the Status of aUSD as Of Today
Acala’s most recent report states that the network has a total supply of 10,961,589 aUSD. The Acala Foundation recollateralized 5,837,712 USD.
The protocol was also able to recapitalize Acala Swap and restore its liquidity levels to pre-incident levels thanks to the Alcala foundation’s support.
“All aUSD in circulation have been recollateralized, and liquidity pools have been recapitalized. The Acala network can now resume normal operations.”
Some assets remain frozen by community vote while others are locked in various centralized exchanges (CEX), which supported the aUSD recovery efforts. Acala even offers rewards up to 5% for users who return funds that were involved in the incident.
Centralization vs. Decentralization
Alcala’s team was quick to react, but they had to stop users from using their funds in order to manage the situation. This is contrary to the protocol’s decentralized, censorship-resistant nature.
Although Acala’s decision was criticized on social media by some users, the collapse or another stablecoin such as aUSD could have caused chaos for the crypto market, given the precedents of UST/LUNA.
It would need to go to Governance for “decentralized finance” (DeFi). Is this DeFi if Acala controls the decision?
(@Gr33nHatt3R August 14, 2022
Acala is now operating its network again, but it needs to win back the trust of its users. Sometimes, this is more difficult than programming a smart contract.
Alcala Resumes Operations after Printing More Than $3 Billion in Stablecoins By Mistake appeared first at CryptoPotato
Marla Brooks – Financial Analysis
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