A hacker has stolen $535,000 from Balancer DeFi platform by taking advantage of a loophole. Balancer co-founder took responsibility after overlooking a bug report concerning the same attack vector.
A Twitter user Reported on Sunday, June 28, 2020, that Balancer Pool’s security had been violated. The platfom becomes the latest victim of a digital incursion. The first person to report the incident was researcher Steven Zheng via a tweet:
“Apparently someone drained a Balancer Pool made up of ETH and STA and got away with $500k worth of ETH.
Confirming the incident, Balancer said the attacker managed to siphon funds from two pools. The firm noted that the two pools contained tokens with transfer fees, known as deflationary tokens.
Crypto Market on Back Foot
1 Inch Decentralized exchange explained in a statement. The said the attacker used a smart contract to automate multiple actions within a single transaction. As per 1Inch, the attack happened as a result of Balancer Pools’ structure which has multi-dimensional automatic market makers (AMM). The pools contain multiple assets that keep them balanced in specific quantities. The create arbitrage opportunities for swapping any assets by forming prices with a unique formula.
The attack took place at a time when the crypto-asset market was on the back foot. The past weekend that saw many significant cryptocurrencies slide in value. Decentralized Finance (DeFi) has been on fire over the same period having hit a new all-time high. The total market capitalization for cryptocurrencies dropped to a low of $254 billion on Sunday. There was a slight recovery on Monday. The Asian trading session lifted them slightly, but the overall sentiment is still generally bearish.
DeFi on Fire
DeFi markets have been on fire. This is due to an increase in the number of token distribution incentives from the largest platforms in the industry. The performance of DeFi markets is measured in the total value of digital collateral locked across all protocols. The TVL reached an all-time high of $1.65 billion over the weekend. According to Defipulse.com, Decentralized Finance has itself grown by over 140% since the beginning of the year. Compared this to the 36% growth in the cryptocurrency market.
Decentralized Finance (DeFi) is a decentralized ecosystem of the borrowing and lending market based on crypto collateral. The recent token distribution program from Balancer and Compound Finance gave birth to the DeFi yield farming craze. This enables an investor to provide liquidity to the platforms. They lock up their crypto assets for high-interest rates and token giveaways.
Bumps in the Digital Road
Balancer is not the first DeFi platform to have users exploit vulnerabilities in their systems. In early June Bancor DeFi platform lost an estimated $460k. The attacker drained the tokens from the protocol following a smart contract upgrade. Bancor has audited the smart contracted and confirmed that user funds are safe. DeFi is experiencing exponential growth. You can expect a few bumps in the digital road to a decentralized financial future.