Yala's Bitcoin-backed stablecoin YU fell to $0.2046 after experiencing an "attack attempt" early Sunday morning and has yet to re-establish its peg to the dollar.
The Yala team confirmed the incident in a post on the X platform, noting that the attack "briefly affected YU's peg." The team added that they are working with blockchain security firm SlowMist and other security partners to investigate the vulnerability.
"Update: All funds are secure. The Bitcoin deposited in Yala remains self-custodied or in the vault, with no losses," the team wrote in their latest post on the X platform. "We have identified the issue and, as a precaution, have suspended certain product features. Please wait for our green light signal before re-engaging," they added.
To prevent further instability, Yala has disabled its conversion and bridging features. "All other protocol functions remain unaffected, and user assets are still secure," the team stated in a follow-up post.
The Yala team did not disclose whether the hacking attempt was successful or resulted in any losses. However, blockchain analytics firm Lookonchain claims that the attacker minted 120 million YU tokens using the Yala protocol on Polygon (MATIC), then bridged and sold 7.71 million YU on Ethereum (ETH) and Solana (SOL) in exchange for 7.7 million USDC.
According to Lookonchain, the attacker subsequently converted the USDC into 1,501 ETH and dispersed the funds across multiple wallets. The attacker still holds 22.29 million YU on Ethereum and Solana, with an additional 90 million YU remaining unbridged on Polygon.
YU is backed by over-collateralized Bitcoin (BTC) reserves and aims to maintain a $1 peg. Although the project has a market cap of $119 million, its Ethereum pool has only $340,000 in USDC liquidity, according to DEX Screener data.
After dropping to a low of $0.2046, YU rebounded to $0.917. However, the stablecoin has since remained under pressure and has not managed to restore its peg. According to DEX Screener data, YU is currently trading at approximately $0.7869.
Cointelegraph reached out to Yala for comment but had not received a response by the time of publication.
The stablecoin market is approaching the $300 billion milestone. On Thursday, CoinMarketCap reported a figure of $300 billion, while CoinGecko and DefiLlama listed $291 billion and $289 billion, respectively.
After surpassing a $200 billion market cap by the end of 2024, the growth of the stablecoin market has accelerated, but according to Axelar's growth director Chris Robins, stablecoins have yet to achieve mainstream adoption.
"$300 billion is an early milestone in the growth of stablecoins," he said, noting that the growth of stablecoins is primarily driven by Tether's USDT, Circle's USDC, and Ethena Labs' yield-bearing stablecoin USDe.
Related: The Truth Behind Cryptocurrency Scams, Hacking Attacks, and Blockchain Security
Original article: “Yala's YU Stablecoin Fails to Re-establish Dollar Peg After 'Attack Attempt'”
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