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Recent happenings on Yala protocol
Yala Protocol lets users borrow against Bitcoin in a self-custodial way by minting a stablecoin called $YU
After growing to over $200 million in supply, the protocol faced two major stability failures in 2025.
The first occurred in September when an attacker exploited a configuration error on Polygon and minted fake $YU.
This caused a brief depeg and drained millions in stablecoins.
The team added liquidity, the peg recovered, but confidence and liquidity were weakened.
In November, $YU collapsed again, dropping to around $0.40.
This was not a new hack but a chain reaction from earlier damage.
A major wallet borrowed all available USDC from Euler markets, causing extreme rates, zero liquidity, and severe pool imbalances.
Liquidity across chains dried up, making arbitrage impossible.
Additional pressures included lingering stress from September, warnings about bridge risks, and broader market instability with multiple stablecoins failing.
Yala responded with an update investigating losses and preparing a recovery plan for mid-December
They denied links to suspicious wallets and stated it was a liquidity crisis, not an insider attack.
As of now, $YU trades between $0.48–$0.52 with only partially restored liquidity.
The events highlight how vulnerable cross-chain stablecoins are when hacks, leverage, and market fear combine.
@yalaorg

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