OUSD loses peg, drops to zero following a hack attack on Original Dollar protocol

Original Protocol loses over $7 million due to a flash loan hack attack.
OUSD price drops to zero as the project loses its collateral.

Another DeFi protocol fell victim to a hack attack during early Asian hours on Tuesday, November 17. The cybercriminals exploited the flash loan scheme to steal at least $7 million from Original Dollar protocol.

Hackers exploited OUSD vulnerability

The co-founder of Original Protocol, Matthew Liu, confirmed that the project was hacked and the funds were lost. The attacker drained about $7 million in ETH and DAI, including $1 million of founders and employees money.

Unfortunately OUSD was hacked 2 hours ago and there has been a loss of funds. The @OriginProtocol team is all-hands on deck working on resolving this issue. Please do not buy or mint OUSD right now. New updates will be coming every few minutes.https://t.co/D4qTwvnYoM
— Matthew Liu (@matthewliu) November 17, 2020

Liu assured the community that the team was investigating the case and doing everything in their hands to understand hack and recover losses. Namely, the project works with cryptocurrency exchanges and third-party providers to prevent the attacker from laundering the money.

According to the latest information, Tornado Cash and renBTC protocols were used to wash and move funds; however, at least 7,137 ETH and 2.249M DAI are still sitting in one of the hacker's wallets.

In a Medium post, Matthew Liu applied to the hacker asking to return the funds and promising not to pursue legal actions.

We humbly ask you to consider the hundreds of innocent people you are hurting and return the funds.

OUSD loses value as the collateral is gone

OUSD is a stablecoin launched by Origin Protocol in September 2020. The project offered holders passive income without the need to freeze large amounts of coins as collateral. OUSD is pegged to a basket of other stablecoins, including USDT, USDC and DAI.

Considering that the project lost nearly 90% of the coins they used as collateral for their stablecoin, OUSD lost the peg and dropped to $0.1 after the incident.

According to Uniswap data, users performed over 1000 transactions within the last 24 hours, which is over 4000% higher than the average figures. Moreover, OUSD liquidity and the price dropped to zero.

OUSD chart, Uniswap

DeFi sector plagued by hack attacks

Original Dollar is not the first victim of hackers. Harvest Finance, Value DeFi, and Akropolis are among the protocols that were attacked via the flash loan mechanism and the list of incidents is likely to continue.

This episode highlights the risks related to the DeFi sector and the immaturity of the flash loans that can be easily exploited by attackers.

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