The Acala Network’s aUSD stablecoin depegged by over 99% over the weekend and forced the Acala team to pause a hacker’s wallet, raising concerns about its claim of being decentralized.
On Sunday, a hacker took advantage of a bug on the iBTC/aUSD liquidity pool which resulted in 1.2 billion aUSD being minted without collateral. This event crashed the United States dollar-pegged stablecoin to $.01, and in response, the Acala team froze the erroneously minted tokens by placing the network in maintenance mode.
The move also halted other features such as swaps, xcm (cross-chain communications on Polkadot), and the oracle pallet price feeds until “further notice.”
While the move to put the network in maintenance mode and freeze funds in the hacker’s wallet may have been meant to protect users and the network from any further harm, proponents of decentralization have cried foul.
Acala is a cross-chain decentralized finance (DeFi) hub that issues the aUSD stablecoin based on the Polkadot blockchain. aUSD is a crypto-backed stablecoin which Acala claims is censorship-resistant. iBTC is a form of Wrapped Bitcoin (wBTC), which can be used in DeFi protocols.
Community members have noted the irony of Acala’s claims about aUSD’s censorship resistance since the protocol froze funds so swiftly. Twitter user Gr33nHatt3R.dot pointed out on Aug. 14 that decisions “would have to go to governance to be ‘decentralized’ finance:”
“If Acala centrally controls that decision is this really DeFi?”
A member of the project’s Discord channel usafmike proposed rolling back the chain to reverse the token mints altogether but was challenged by skylordafk.dot, another member who said such an action would “set a harmful precedent.”
As of the time of writing, the network was still in maintenance mode to block all token transfers, but the team confirmed that the bug had been fixed. The wallets that received erroneously minted aUSD have been identified, and 99% of them were still on Acala which leaves the possibility that they may be retrieved by the community if it votes to do so.
The Acala exploit is the second major one in a week as Curve Finance experienced an attack on its front end on Aug. 9, which directed users to approve a malicious contract. Acala’s problem differs from Curve’s, as the latter’s pools were not compromised as users who directly interacted with its smart contracts experienced no issues.
aUSD is the latest stablecoin to lose its peg in the past few months, starting notoriously with TerraUSD (UST) in May, which has since been renamed to TerraUSD Classic (USTC). Other notable depegs include Tether (USDT) and Dei (DEI).
The Bank of Russia continues working towards the upcoming adoption of the central bank digital currency (CBDC), planning an official digital ruble rollout in a few years.
According to the Bank of Russia’s latest monetary policy update, the authority will begin to connect all banks and credit institutions to the digital ruble platform in 2024. That would be an important year for Russia as the country is expected to hold presidential elections in March 2024 and incumbent President Vladimir Putin has the constitutional right to get re-elected.
By that time, the central bank expects to complete “real money” customer-to-customer transaction trials as well as the testing of customer-to-business and business-to-customer settlements.
In 2023, the Bank of Russia also intend to conduct beta testing of digital ruble-based smart contracts for trades by a limited circle of participants.
The bank pointed out that it expects to proceed with the CBDC rollout in a gradual manner, unlocking new different trials and features year by year. As soon as the Federal Treasury is ready, the digital ruble will also feature consumer-to-government, business-to-government, government-to-consumer and government-to-business payments, the Bank of Russia said.
The central bank also expects to introduce the offline mode for the digital ruble by 2025 alongside integration of non-bank financial intermediaries, financial platforms and exchange infrastructure.
“The phased process of introducing the digital ruble will provide market participants with the opportunity to adapt to new conditions,” the Bank of Russia noted.
The Bank of Russia will also cooperate with other central banks developing their own digital currencies to carry out cross-border and foreign exchange operations with digital currencies, the authority added.
Paradigm has announced the launch of spreads trading in partnership with crypto exchange FTX.
In a Friday blog post, Paradigm said under the FTX partnership users would be able to utilize “one-click” trading with “no leg risk” for the spread between spot, perpetuals and fixed maturity futures on Bitcoin (BTC), Ether (ETH), Solana (SOL), Avalanche (AVAX), ApeCoin (APE), Dogecoin (DOGE), Chainlink (LINK) and Litecoin (LTC). FTX will provide “guaranteed atomic execution and clearing of both legs” for the trades.
According to Paradigm CEO Anand Gomes, the arrangement was aimed at drawing in new crypto investors interested in cash and carry trades — leveraging crypto spot purchases and futures instruments on FTX. Gomes added that the rollout could lead to new product offerings “further down the road.”
The firm said using atomic execution for both legs of the spreads trading was “structurally less risky” than those executed on a traditional exchange, allowing market makers to “quote much tighter prices and in significantly larger sizes.” According to Paradigm, the fees will be 50% less than that when executing two individual outright trades.
In 2019, Paradigm partnered with crypto derivatives exchange Deribit to launch a block trading solution.
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