- The Acala community has proposed conducting a coin burn to help the USD regain parity with the dollar.
- After a referendum, the project can burn 1.3 billion USD by sending it to the Honzon protocol.
- The project was exploited yesterday when an attacker deposited the same amount of USD via a vulnerability.
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The Acala community has proposed burning tokens to help the stablecoin restore dollar parity after this weekend’s attack.
Acala can perform coin burning
Acala could perform a coin burn to restore the USD value to $1.
In a proposal published on August 15, community member Dotverse proposed a referendum to decide whether to burn a portion of the coin supply of the aUSD stablecoin.
If successful, the referendum would “effectively burn” the US$1.3 billion that was wrongly minted, returning those funds to the Honzon Protocol. It will also burn 4.2 million aUSD still in the iBTC/aUSD reward pool in the same way. This action would “help resolve the error mint, restore [the] aUSD link, and resume Acala operations,” the proposal states.
The coin burning has received tentative support from society. However, some users expressed a desire for additional information before making a decision. A person involved in the project, Bette7, confirmed that “additional tracks[s] on more funds is underway” to help with return decisions.
Acala was exploited yesterday, August 14, through a vulnerability that allowed an attacker to make $1.3 billion ($1.3 billion). The attacker exchanged these tokens for various cryptocurrencies, including the project’s original ACA token.
These events have caused the value of Acala’s aUSD stablecoin to drop to zero. Additionally, the Acala network is currently frozen.
Acala is intended to serve as a DeFi hub for Polkadot, with USD serving as the de facto stablecoin for Polakdot and related blockchains. As such, it is necessary for the project to revive its stablecoin to resume activity.
Acala is not the first stablecoin to experience a major depegging crisis this year. Terra, which saw its TerraUSD stablecoin rapidly devalued in May, similarly proposed a coin burn as a response. However, that solution and others failed and the asset eventually collapsed.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH and other cryptocurrencies.