Acala To Burn $1.2B aUSD After Minting Bug

Some LPs Were Able To Claim Excessive Rewards

The Acala blockchain is poised to destroy more than $1.2B in erroneously minted tokens.

Acala Dollar (aUSD), the network’s native stablecoin, lost its dollar peg in UST-esque fashion on Saturday after a bug caused the network to erroneously mint over 1.2B aUSD.

Trading at about $1.02 on Saturday evening New York time, aUSD plunged to less than a penny per token, according to data from CoinMarketCap.

The blockchain remains paused while the team works to resolve the situation.

Polkadot Ecosystem

In March, nine Polkadot parachain teams launched a $250M Ecosystem Fund to support early-stage startups building Polkadot-based dApps that support aUSD – a crypto-backed, overcollateralized stablecoin.

Acala is one of several parachains on Polkadot, the confederation of interrelated blockchains founded by Ethereum co-founder Gavin Wood.

A new iBTC-aUSD liquidity pool that launched on Saturday contained a software bug, Acala said in a post-mortem published on Monday. Consequently, 16 liquidity providers received about 1.2B newly minted aUSD when claiming rewards from the liquidity pool. Another 4.3M remains unclaimed in the reward pool.

Some of the wallets that received the aUSD may have done so in error, according to pseudonymous Twitter user Alice and Bob, who tracked the movement of the tokens. Others tried to make off with the money, however, transferring the aUSD to Moonbeam, another blockchain in the Polkadot ecosystem, or swapping it for other tokens and sending those to other chains. 

In sum, about $1.6M in assorted tokens were moved out of Acala, Alice and Bob estimated. 

More than 99% of the 1.2B tokens remain on the Acala network, according to the post-mortem. Acala halted the ability to transfer those tokens within three hours of discovering the bug, and is proposing that they be destroyed to restore the aUSD dollar peg.

Burn Proposal Passes

More than 95% of votes cast support burning the erroneously minted aUSD. 

One of the 16 affected users who goes by gnossienli, expressed their support for the measure. But they — and other liquidity providers on Acala — sought information concerning the network’s other liquidity pools, which were affected by the de-peg.

“Some [erroneously minted] aUSD was exchanged for LCDOT, IBTC, DOT,” gnossienli wrote on Acala’s governance forum, “and the current valuation of the pools are completely off from market prices.”

Acala co-founder Bette Chen wrote, “likely to have multiple trace reports as we progress, which can help make decisions on how to correct the mint, repeg, manage the pools etc, before gradually resume normal operation.”