In a recent blow to decentralized finance (DeFi), Onyx Protocol, a peer-to-peer lending platform, lost $2.1 million due to a well-known bug linked to the CompoundV2 fork. This exploit, executed on October 27, exposed vulnerabilities within Onyx Protocol’s smart contract and the wider DeFi landscape.
PeckShield, a blockchain investigator, quickly identified the bug, which had previously been exploited to pilfer $7 million from Hundred Finance in April. The hacker targeted Onyx Protocol’s liquidity-poor oPEPE market, using donations to borrow from more liquid markets and exploiting the bug during redemption.
#PeckShieldAlert @OnyxProtocol has been exploited for ~2.1M pic.twitter.com/5Z50tCg6MD
— PeckShieldAlert (@PeckShieldAlert) November 1, 2023
This loss is a major setback for Onyx Protocol, emphasizing the risks that come with DeFi platforms. It echoes the need for proactive security measures in the DeFi space, as such vulnerabilities can be attractive to malicious actors.
This incident reiterates the importance of security audits and best practices in smart contract development within the DeFi ecosystem. The recurring exploitation of the same bug underlines the necessity for immediate community-driven responses to known threats. The DeFi sector must adapt and evolve to enhance security and safeguard all participants.
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