In Crypto, Base Layer Security Isn’t Enough
Earlier this week a new type of stablecoin (aUSD), built on a platform (Acala), which itself was built on a blockchain (Polkadot), fell from its $1 peg to $0.009 (which rounds to zero as far as I’m concerned), following an attack on one of the platform’s liquidity pools. If the words following “attack on” seem to be oddly specific, that’s because they are.
Acala wasn’t attacked, hacked and thwarted directly. Rather, the iBTC/aUSD liquidity pool, something built on top of Acala, was attacked, hacked and thwarted directly. The exploit was successful and allowed bad actors to create billions of aUSD for themselves. This influx of new aUSD crushed the price of the stablecoin strictly through immense supply dilution. aUSD has since recovered, but only after the Acala community voted to destroy the billions of the improperly minted aUSD. Never mind that the minted aUSD wasn’t really improperly minted and never mind the need for a centralizing force to come in to fix this mistake, let’s instead look at how cryptocurrency protocols are only as secure as what’s built on top of them.
Full story : In Crypto, Base Layer Security Isn’t Enough.