Polkadot-Based Acala USD: Yet Another Algorithmic Stablecoin Disaster

Acala's aUSD stablecoin collapsed this week.While the community voted to burn 1.3 billion aUSD tokens that were erroneously minted, there are still roughly 1.7 billion outstanding.Impact on Polkadot's token is likely minimal.Acala Network (ACA-USD) has been dubbed the "decentralized stablecoin of Polkadot" (DOT-USD). Last year, Acala won a Polkadot parachain slot auction which made it one of the first Polkadot parachain slot holders, of which there will only be 100. This is important for a variety of reasons, but the main point is getting a parachain slot is validation that Acala Network is an important piece of what Polkadot is trying to build.Acala has two coins; ACA is the governance token of the protocol and aUSD is the algorithmic stablecoin for DeFi activity on Polkadot. Algorithmic stablecoins are different from traditional stablecoins because they're not collateralized by real dollars or other assets. Instead, they rely on math and incentives to maintain dollar pegs. The most famous example of an algorithmic stablecoin is the recently obliterated TerraUSD (UST-USD). The collapse of which was the first domino in the crypto contagion that also took out Celsius Network (CEL-USD), Voyager Digital (VGX-USD)(OTCPK:VYGVQ), and 3 Arrows Capital, among others.Acala's stablecoin has been on a wild ride over the last few days and in this article we'll explore what happened, the impact on Polkadot, and whether we may now have an a...