Yala’s YU Stablecoin Fails to Bounce Back After Suspected Attack

Yala's YU stablecoin struggles to regain footing following suspected exploit—just another day in decentralized finance.

Market Impact

The protocol's native token continues trading at depressed levels as investors question the robustness of its stabilization mechanisms. Trading volumes remain thin—nobody's rushing back to a wounded stablecoin, not even yield farmers desperate for APY.

Technical Analysis

On-chain data reveals abnormal transaction patterns consistent with orchestrated attacks. The team's mitigation efforts so far haven't restored confidence—typical 'code is law' until the law doesn't favor the developers.

Broader Implications

Another algorithmic stablecoin wobbles under pressure, proving once again that crypto's favorite parlor trick—creating money from code—still can't escape traditional finance's oldest problem: trust.

• Yala’s Bitcoin-backed YU stablecoin drops to $0.2046 after a suspected attack, failing to regain its $1 peg.
• No funds were lost, but Convert and Bridge features are paused to avoid further instability.
• The attacker mints 120M YU tokens, exchanges stolen funds for ETH, and still controls millions of YU tokens.

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.

Our protocol recently experienced an attempted attack that briefly impacted YU’s peg. Thanks to the quick collaboration with @SlowMist_Team and our security partners, we’ve identified the issue and are already rolling out improvements to strengthen the system.

All user assets…

Yala Pauses Functions, Ensures Asset Safety

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.

Millions of YU Tokens Held by Attacker, Impacting Stability

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.

A hacker minted 120M $YU on Polygon and then sold 7.71M $YU for 7.7M $USDC on Ethereum and Solana via cross-chain.

The hacker still holds 22.29M $YU on Solana and Ethereum, with another 90M $YU still on Polygon that has not been bridged.

The hacker has now exchanged 7.7M $USDC… pic.twitter.com/508QU96DpF

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.