$500k in ETH and other altcoins stolen in hack from a DeFi App
According to The Block’s Steven Zheng, a Telegram group administrator who realized that there was a problem with Balancer, the DeFi protocol focused on facilitating token swaps. Mr. Zheng became one of the first people to spread this news through Twitter.
Apparently someone drained a Balancer Pool made up of WETH and STA and got away with $500k worth of WETH. pic.twitter.com/SKshyDXagi
— Steven (@Dogetoshi) June 28, 2020
“Apparently, someone drained a Balancer Pool made up of WETH and STA and got away with WETH worth $ 500,000“, Mr. Zheng wrote.
Early on Sunday afternoon, reports began circulating through social media that a newly hacked purpose could temporarily slow DeFi’s growth.
The value of locked cryptocurrencies in DeFi applications has skyrocketed to $ 1.65 billion, 65% higher than this figure just 12 days ago. At the same time, the number of users taking advantage of applications such as Compound, Maker and Synthetix has skyrocketed.
The attack was confirmed by Ethereum-based decentralized exchange 1inch and Mike McDonald, co-founder of Balancer Labs, after Zheng’s tweeted for a few hours. Balancer Labs is the unit behind Balancer’s development; formerly a company, the latter is a protocol based on Ethereum.
Research by the exchange shows that the attacker used a smart contract to manipulate the Balancer Pool to make it indebted. As a result, Zhang was right: Ethereum was worth more than $ 500,000 and other altcoins were drained out of this attack.
“These funds were used to exchange the WETH token to the STA token back and forth 24 times, draining the STA balance from the pool. Each time an attacker swaps WETH into STA, the Balancer Pool receives 1% less STA than expected“.
Later, Ethereum users took advantage of a vulnerability to withdraw Wrapped Ethereum, Wrapped Bitcoin, Chainlink and Synthetix from the pool. As mentioned above, the value of stolen funds amounted to ~ 500,000 dollars.
1inch has considered the hacker as a very sophisticated smart contract engineer with extensive knowledge and understanding of the leading DeFi protocols due to the exploits used. The attacker is currently at large because they used the Ethereum mixer to tamper with their identity/relationship to exchange.
Balancer Labs’ post, Mike McDonald, endorses what the decentralized exchange staff wrote.
Hacks is not the only problem that DeFi is currently facing
Concerns over high transaction fees, Joseph Todaro of BlockTown Capital wrote:
“If fees increase higher or even maintain this level, I hope $ ETH competitors to focus on scalability to increased attention“.
Larry Sukernik, an investor at Digital Currency Group, argues that DeFi products are too complex for their own benefit.
“A very high IQ can be a turning point for building great successful products. You get people with big brains that need to be put to work. And when they go into operation, the result is often a complex, brilliant, but unable to use massively product. Lots of that in DeFi now“, he explained.
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