Another DeFi exploit: @yalaorg, a BTC-backed "stable" coin backed by big-name VCs like @polychain, @ambergroup_io, and @galaxyhq, just crashed overnight. $YU dropped from its $1 peg to $0.26 in a wild depeg saga. TLDR: the team has no DeFi expertise to handle depegs 🧵👇👇 What Happened? 1. A wallet linked to @yalaorg (0x819...1e9c) collateralized with $YU to aggressively borrow nearly all available $USDC on @eulerfinance, pushing pool utilisation rate to 100% and borrow rates to 80% APY. 2. Despite high costs, no repayments occurred, and the PSM (for peg maintenance) wasn't refilled. Why drain available liquidity across both EVM chains and Solana? 3. Liquidity on EVM chains was already thin at that time—pools were >90% $YU, with little $USDC for exits. 4. $YU then depegged twice overnight. Panic selling ensued as holders tried to exit. Low liquidity amplified slippage and $YU dipped to $0.41–$0.42. 5. Trading volume plummeted 98.7% as $YU pools became imbalanced ("Sea of YU" with no $USDC): the @Solana side held better (~$1M $USDC liquidity), but EVM chains were wrecked. 6. Discord and X of @yalaorg went unresponsive. $YU continued falling to $0.27, with TVL at risk (~$200M pre-depeg). Post-Mortem: - It's not a new kind of exploit, but cascading failures; high-leverage borrowing without repayment drained liquidity, creating a death spiral. Poor risk management—100% utilization signals insolvency risk, while the liquidity pools don't have enough liquidity to withstand the $YU selling pressure. - The team seems to have conflate 'collateral ratio' with 'peg stability', and no pre-designed mechanism exists to ensure peg stability. Clearly the PSM way alone does not work well. - @LidoFinance, in contrast, did very well to restore the peg. As $stETH depegged, Lido immediately created a factory pool of ETH:stETH on @CurveFinance, with a much larger amplification factor A of 200 (ie more concentrated liquidity), drawing more stETH via its $LDO incentives out from the original pool of 60A to rebalance the ratio of ETH:stETH in that pool (see - The weirdest thing is the team's response: minimal—vague investigation promise. No function disables or redemptions announced yet. Lessons: 1. Good VC backing does not mean the team is equally capable, especially when you know VCs favour resume-type founders. 2. DeFi expertise is rare and probably becomes a very valuable asset as RWA on-chain products need people with DeFi expertise to bootstrap on-chain liquidity without experiencing similar problems