Maybe the rest of the bike melted and that's all that's leftDid you take it out in the rain?
Agree 100%. Alloy doesnt rust but It does turn furry white when it oxidises and soon blisters up any paint on it.No, its corrosion, 100%. The aluminium end on the stay has begun to oxidise and the paint has lifted and then flaked off. The only worry is that is an ally end bonded into a carbon seat stay - if the corrosion begins to extend into the bonded area, there could be a problem.
That's a rather neglected Roubaix of about 2006 vintage, I had the same on mine. Moisture gets under the very thick hard paint and travels around before the paint breaks away. Clean it all thoroughly, remove paint, etch prime (this is a paint that eats into the surface of the alloy to get a good key) and hope the moisture hasn't wicked up between the dropout and the tube. While you're at it, check the alloy bottle cage bosses - mine oxidised under the drenching with water and carbs mix and fell out. Repaint everything then cover in lacquer. A good repair might get you a few more years out of the frame.