Yala’s Bitcoin-Backed Stablecoin YU Loses Dollar Peg After Exploit

• The team has said that they are collaborating with SlowMist, a blockchain security startup, and other security partners in their investigation into the hack.
• Moreover, the team assured users that their assets would be secure and that no other protocol functionalities would be impacted.

After a precipitous “attempted attack” early Sunday caused Yala’s Bitcoin-backed stablecoin YU to crash below $0.2046, it has been unable to recover its dollar peg.

In an X post, the Yala crew verified the occurrence and said it “briefly impacted YU’s peg.” Additionally, the team has said that they are collaborating with SlowMist, a blockchain security startup, and other security partners in their investigation into the hack.

The team wrote in their latest post on X:

“Update: All funds are safe. Bitcoin deposited to Yala remains self-custodial or in vaults, with none lost. We’ve identified issues and, as a precaution, paused some product features. Please wait for our green light before re-engaging.”

To make things even more stable, Yala has turned off the Convert and Bridge functions. In a subsequent post, the team assured users that their assets would be secure and that no other protocol functionalities would be impacted.

Damages Not Disclosed Yet

Whether or whether the hack was successful and caused damages was not disclosed by the Yala team. Nevertheless, according to Lookonchain, a blockchain analytics company, the perpetrator took use of the Yala protocol by creating 120 million YU tokens on Polygon (MATIC), and then trading 7.7 million YU for 7.7,000,000 USDC on Solana and Ethereum.

According to Lookonchain, the hacker has subsequently split the USDC into 1,501 ETH and sent the money to several wallets. An further 90 million YU are still unbridged on Polygon, and the attacker still has 22.29 million YU on Solana and Ethereum.

A $1 peg is intended to be maintained by YU, which is supported by overcollateralized Bitcoin reserves. Despite the project’s $119 million market cap, DEX Screener reports that its Ethereum pool only has $340,000 in USDC liquidity. After falling to a low of $0.2046, YU recovered and was trading at $0.917. But since then, the stablecoin has been under scrutiny and has been unable to regain its peg.

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