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HomeCrypto NewsMarketIs Acala USD Losing Its Peg Again? aUSD Drops To 80 Cents

Is Acala USD Losing Its Peg Again? aUSD Drops To 80 Cents


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The aUSD price is still slipping.

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In a tweet today, PeckShieldAlert reveals that Acala USD (aUSD) is down to $0.81, moving further away from the dollar peg.

It is worth noting that aUSD first lost its peg on August 13, forming new lows below $0.1 on August 14. The team confirmed that the incident resulted from an erroneous configuration in its newly launched iBTC/aUSD liquidity pool that allowed bad actors to mint over 3 billion aUSD in excess. 

Notably, following the exploit, the team swooped into action, pausing the Acala parachain and launching a community vote to burn about 1.29 billion aUSD of the excess aUSD in supply that developers had traced to 16 wallets. The community swiftly passed the proposal with a 95% vote in favor. Consequently, the move allowed the token to rise over 10,000% in 24 hours edging closer to its peg at above $0.9.

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Furthermore, on Sunday, the community passed a referendum to burn an additional 1.68 billion aUSD minted during the exploit traced to one of the 16 accounts. Notably, these coins have since been burnt, leaving the remaining excess supply in millions.

While some have praised the Acala team for its swift response, others have raised concerns about centralization. Some users have noted that despite their belief in the fairness of the actions taken, it is worrisome that the development team of a decentralized network can pause the network operations and access user funds through a vote.

While the Acala team has yet to address these centralization concerns, today, the team has released a blog post updating the community on its progress. The team notes that its focus in the coming weeks is to provide trace results for the remaining error mints, work to resolve imbalances in affected liquidity pools affected by the excess mints, and create a plan for recovery and resumption of operations.

Notably, stablecoins, primarily algorithmic stablecoins that maintain their peg through math and arbitrage incentives, have come under increased scrutiny following the Terra debacle in May. The de-pegging of Terra USD (UST) led to over $40 billion of investor funds being wiped off the market and is fingered as the catalyst for the subsequent collapse of several crypto lending firms.

It is worth noting that the Acala Network was the first chain to win a Polkadot Parachain auction. The network has two tokens, ACA, the governance token, and aUSD, the algorithmic stablecoin for DeFi activity. Notably, unlike the Terra debacle, an aUSD de-pegging is not expected to affect DOT significantly.

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Mark Brennan
Mark Brennanhttps://thecryptobasic.com/
Mark Brennan has been active in the cryptocurrency sector since 2014. His love and passion for the nascent industry drove him to develop interest in writing about important developments and updates about cryptocurrencies and blockchain. Brennan, who holds a Masters degree in Business Administration, learned about the potential of blockchain technology. Aside from crypto journalism, Brennan runs an education center, where he educates people about the asset class.

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