Decentralized exchange, Curve Finance loses $61 million to a crypto hack

Decentralized exchange, Curve Finance loses $61 million to a crypto hack

Time Stamp: August 8, 2023 12:30 AM
  • In July 2023, this decentralized exchange experienced several crypto hacks, resulting in the loss of over $61 million in crypto coins.
  • Michael Egorove founded the Deneralized Exchange in 2020 to create an Automated Market Maker(AMM) exchange.
  • Alchemix’s alETH-ETH, JPEGd’s pETH-ETH pool, and Metronome’s sETH-ETH pool also suffered a loss of $13.6 million, $11.4 million, and $1.6 million, respectively.

The crypto ecosystem has served several crucial turning points over the years. Its lucrative nature hides a vast potential for risk, and throughout decades, developers have tried to mitigate them. Among its list o disadvantages, crypto hacks stand second only to the market’s high volatility. In 202, the entire market shook to its core, with the FTX cash highlighting that crypto hacks and scams can occur through prominent exchanges. Unfortunately, amid the many crypto lawsuits and skeptical regulators, other decentralized exchanges fell victim to a crypto hack. Curve Finance, an upcoming exchange in Ethereum’s blockchain network, lost at least $61 million through a crypto hack many dubs the Vyper Exploit.

This recent hack has rippled throughout the system, further destroying the market’s little reputation.

The sophistication of Curve Finance

There are currently thousands of crypto coins alongside hundreds of crypto exchanges, each eyeing to dethrone Bitcoin. Amid this competitive race stands Ethereum, which has chosen a different path from the original cryptocurrency. According to Vitalik Buterin, Ethereum exist to improve the entire web3 ecosystem. The company has developed a suitable blockchain ecosystem to achieve this, willing numerous developers to create and develop new blockchain-based systems. Along its long line of success stands Curve Finance which took a rather rudimentary approach to the entire market.

Curve Finance is a popular automated market maker platform offering efficient ways to exchange tokens while maintaining low fuel charges. Its functionalities are similar to Unisawp and the balancer, with significant difference intel the approach. The Crruve Finac resides within Ethereum’s blockchain network as a Decentralized exchange. Unlike its peers, this DEX accommodates liquidity polls of stable coins or wrapped versions of cryptocurrencies like wBTC and tBTC.

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Michael Egorove founded the Deneralized Exchange in 2020 to create an Automated Market Maker(AMM) exchange that provides low fees and efficient fiat savings accounts for liquidity providers. An AMM exchange allows digital assets to be traded permissionless ad automatically through liquidity pools.

AMM-Exchange

The basic functionalities of an Automated Market Maker Exchange.[Photo/Medium]

This approach differs from the standard P2P trading in regular exchanges. At its core, the liquidity pool is generally a shared pot of tokens. Users typically supply the liquidity pool with tokens, and their underlying system determines the value of each received. The Curve nace tweaked this approach through a mathematical format, resulting in alternative and efficient features.

This decentralized exchange stands tall within Ethereum’s blockchain network. It doesn’t try to maintain an equal value proportion between different sets. Instead, Curve concentrated on the liquidity pool to derive an ideal proof for most of its tokens, keeping a close 1:1 ratio.

Furthermore, Curve Finance has implemented several systems that stabilize the high volatility of serval tokens in its pool, like wBTC and tBTC. This is because the decentralized exchange forgoes its need to stabilize its value in correspondence with BTC and instead stabilizes its value relative to another token within the pool.

Curve Finance falls prey to crypto hacks.

Unfortunately, the same factor that made Curve Fiance so famous is the same factor that lured in crypto hackers.

In July 2023, this decentralized exchange experienced several crypto hacks, resulting in the loss of over $61 million in crypto coins. According to investigators, the crypto hacks mainly targeted their famous liquidity pool and managed to bypass ots standard blockchain security meares. In addition, hackers used a Vyper programming language to exploit the stable pools running within its ecosystem. The Vyper Vulnerability did more damage after investigators discovered the exploit had been in other DeFi projects. 

For that unaware, Vyper is a contract programming language designed to Ethereum Virtual machine. It is one of the sots widely used programming languages in Web3. The discovery of this exploit shakes the foundation of the entire industry. It contains a history o exploitation, but among its failures was the loss of 584.05 Ether tokens.

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The Vyper exploit affected the decentralized exchange Ellipsis which reported several missing BNB tokens from its pool. Alchemix’s alETH-ETH, JPEGd’s pETH-ETH pool, and Metronome’s sETH-ETH pool also suffered a loss of $13.6 million, $11.4 million, and $1.6 million, respectively. 

The Vyper exploited significantly damaged Layer Two projects withinEtherum’s blockchain network causing many to question the titan’s security measures. Michael was forced to announce a 32 million missing Curve DAO(CRV) token worth $22 million from the exploit. Preliminary investigations discovered that the crypto hack existed before the recent incident. They unearthed several older versions of the Vyper Exploit, indicating how weak its systems were.

The crypto hack has caused quite the panic as security analysts warn other Defi projects to avoid utilizing Vyper-based applications. In addition, they have also caused the developers in Ethereum since the wrapped Ether token might be at risk of a potential crypto hack.

Wrapping up 

Crypto hacks are a common factor that plagues the market’s development. Unfortunately, the new nature of blockchain has undermined the effort of security analysis. Today many developers have dedicated their efforts to establishing better crypto security systems.

Despite achieving several milestones like KYC systems, all web3 organizations have a single point of failure; uneducated users. Social engineering and impersonation have been the most significant cause of most crypto hacks. Given the coined development of technology, creating a full-poof security system is unfathomable. However, if w can educate users and developers to acquire a high sense of security, the market might prevent crypto hacks.

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