Solana-based algorithmic stablecoin NIRV become the latest stablecoin to fail following a hack on adaptive yield protocol Nirvana Finance

The $3.5 million flash loan attack Solana-based Nirvana Finance saw the price of its stablecoin NIRV and native token ANA fall around 85% apiece.

Solana-based stablecoin NIRV drops 85% following a $3.5M exploit

The flash loan attack, which also saw Nirvana Finance’s native token ANA drop by 85%, resulted in the loss of $3.49 million worth of Tether (USDT), with the SolanaFM team being the first to confirm that the funds were siphoned via a flash loan attack on July 27: “Utilizing Solend Protocol’s Flash Loans, the hacker borrowed $10M USDC from the Solend Main Pool Vault which was used to exploit $3.49M USDT from the Nirvana Finance Treasury.”

At the time of writing, both NIRV and ANA are down roughly 85% to $0.14 and $1.33 apiece. On Nirvana’s website, it confirms that the protocol was “maliciously hacked and reserve funds are stolen. NIRV and ANA have lost their collateral, and do not have secured market value.”

The Nirvana team is now offering the hacker a whitehat bounty of $300,000 and a “cessation” of the investigation into their identity. So far they revealed that the hacker’s wallet tied to a centralized exchange has been flagged. “Please accept this good faith request and return our treasury for the good of the whole Nirvana community. You have not taken money from VCs or large funds—the treasury you have taken represents the collective hopes of everyday people,” it wrote.

The algorithmically collateralized NIRV is unironically described by the protocol as a “superstable” token. According to an explanatory thread on Solana Forums, the asset is backed by a network of stablecoins in Nirvana’s reserves via a “decentralized peg delegation.”

“NIRV is always treated as $1 from the protocol’s point-of-view. This dollar value is denominated in ANA tokens. For instance, if the spot price of ANA is $12, the protocol accepts 12 NIRV to purchase an ANA token.”

In this instance, it appears that NIRV was depegged as a direct result of $3.49 million worth of USDT being stolen from Nirvana’s coffers. It marks yet another algo-stablecoin that has been severely depegged in 2022. Beanstalk Farm’s algorithmic stablecoin is sitting at $0.0022 after the protocol was hacked for $182 million in April.

Terra’s first variation of its algo-stablecoin Terra USD also famously imploded following a death spiral that resulted in $40 billion being wiped from the market in May.

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