Yala has suffered instability on its YU stablecoin, which is backed by Bitcoin, following a suspected attack on Sunday. The attack led to a sharp decline of the token value to $0.2046, which is much lower than the peg of $1. Even after attempts to revive the peg, the stablecoin has not been able to recover its target value, and this raises concern in the cryptocurrency community.
The Yala team did confirm the breach through a post on X. They said the attack had caused a temporary effect on the peg of YU. Nonetheless, they assured the users that no money was lost. The Bitcoins deposited by Yala are self-custodial or vaulted, without reported losses. The group is collaborating with blockchain security company SlowMist and others in order to explore the hack.
Yala censored important features to avoid additional loss. These functions, known as Convert and Bridge, have been temporarily shut down. The team reassured users that the protocol’s other operations remained unaffected. They highlighted that the user assets are safe and to be cautious. They recommended that users should wait until they get subsequent updates, after which they can resort to using the platform again.
The blockchain analytics provider, Lookonchain, provided additional information. The attacker used the protocol to mint 120 million YU tokens on Polygon (MATIC). The attacker subsequently transferred 7.7 million YU tokens to Ethereum and Solana at a price of USDC. The stolen money was exchanged into 1,501 ETH and was distributed in wallets.
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According to Lookonchain, the attacker also holds a large quantity of YU tokens. They own 22.29 million YU on Ethereum and Solana. Furthermore, there are 90 million YU tokens that have not yet been bridged to Polygon. The existence of these unbridged tokens still exerts strain on the stability of the token.
YU is to stay pegged to $1 with excessive Bitcoin collateral. Nevertheless, since the attack, the stablecoin has not stabilized. According to DEX Screener, YU currently has a market cap of $127.7 million with a liquidity pool of only $364,000 in USDC. YU has reverted briefly to $0.917 and is currently trading at $0.8416.
The stablecoin market is nearly reaching a limit of 300 billion. However, according to industry experts, the mainstream deployment is slow. Users will be advised to remain wary as Yala seeks to correct the issue and receive more news about the status of the platform.
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