BREAKING: Bitcoin-Backed Yala Protocol’s YU Token Exploited on Polygon Network

Yala Protocol's Bitcoin-pegged YU token gets drained in sophisticated Polygon network exploit—raising fresh questions about cross-chain security.

THE VULNERABILITY

Attackers bypassed protocol safeguards, exploiting a flaw in Yala's Bitcoin-backed asset mechanism on Polygon. The breach targeted the YU token's minting process, allowing unauthorized creation and withdrawal of assets.

INDUSTRY FALLOUT

Another day, another 'bulletproof' DeFi protocol learning that code isn't law—attackers are. The exploit follows pattern of cross-chain bridges becoming prime targets for sophisticated hacks.

SECURITY WAKE-UP CALL

While the team investigates, traders are left wondering if their 'Bitcoin exposure' was actually just exposure to someone else's smart contract risk. Because nothing says 'store of value' like watching digital assets vanish into ether.

YU stablecoin loses its USD Peg

Following the exploit, YU stablecoin lost its peg to USD, shrinking as low as $0.2 on Sunday. At the time of writing, YU was trading NEAR $0.86, while having a market cap of over $130 million, as per CoinMarketCap data.  

The team is currently attempting to re-peg the stablecoin and planning to compensate funds to affected liquidity pools while preparing for a full transparency report. “We have identified the stolen assets on-chain and are actively working with law enforcement to pursue recovery,” Yala team said in a recent X post. 

The de-pegging of YU stablecoin has also harked back to the infamous Terra collapse, which wiped out millions from crypto markets overnight. Terra’s algorithmic stablecoin UST also had a similar architecture to YU, backed by the native LUNA coin. 

Also Read: Stablecoin Market Hits $300B, But Discrepancies Expose Data Gaps