A decentralized finance (DeFi) application has been hit by another attack. This time, SafeDollar has fallen victim to an exploit. The value of the stablecoin has since fallen back to $0.
SafeDollar is a Polygon (MATIC) based algorithmic stablecoin. These are stablecoins whose value is kept stable by means of an algorithm. This algorithm puts more stablecoins into circulation when the value of the underlying asset rises and buys stablecoins back from the market when the value falls. Thus, the value of the stablecoin remains stable.
At least, provided everything goes well of course. SafeDollar has been the victim of a bug exploit, although little is known about it yet. In total, $250,000 in USD Coin (USDC) and Tether (USDT) was allegedly stolen from the project’s contracts.
Mudit Gupta, a developer who works on SushiSwap, among other things, explains in a series of tweets what exactly happened. According to him, the attacker cleverly exploited a bug in the project’s code. The attacker would have drained the rewarder by sending a large amount of tokens to the contract and then withdrawing them.