VUSD Stablecoin Depegs After $3.8 Million Exploit of OnyxDAO

OnyxDAO was exploited yesterday for $3.8 million due to a “known precision issue in the forked CompoundV2 code base,” which sent stablecoin VUSD tumbling off its peg.

Virtual USD, or VUSD, is a collateralized stablecoin launched by OnyxDAO, and 4.1 million VUSD was stolen during the hack. VUSD briefly fell by as much as 90% and currently sits 22% off its dollar peg at $0.78.

OnyxDAO is a Compound v2 fork that launched its XCN token in March 2022. Onyx reached an all-time high of $29 million in total value locked (TVL) in April 2023, according to DeFiLlama, before being hacked for $2.1 million in October 2023

Onyx reiterated that “VUSD remains independent from any activity on Onyx Protocol” and published a post-mortem, announcing its intent to shut down its Ethereum-based lending market and reimburse all affected users.

Blockchain security firm PeckShield first flagged the hack, claiming that OnyxDAO “falls prey to a known precision issue in forked CompoundV2 code base. The drained funds include 4.1m VUSD, 7.35m XCN, 5k DAI, 0.23 WBTC, 50k USDT.”

Since the depeg, traders have been arbitraging VUSD under the assumption that it will be able to defend its peg through its reserve of $78 million in stETH. As a result, the token’s liquidity pool fell as low as $250,000 at one point but is now back up to $1 million.

VUSD announced that “$VUSD will be processing redemption requests recently received. There will be VUSD burns & collateral redemption transfers. These are authorized transfers & will correlate to VUSD burns & institutional collateral transfers within 24 hours. VUSD will remain over-collateralized.”

XCN, Onyx’s native token, appears unbothered by the hack and is up 8% over the last 24 hours.