THORChain (RUNE) Faces Attack, Ransom Request

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The increasingly connected DeFi space, relying on smart contracts, is a potential field for hacker attacks. The last project to be affected is THORChain (RUNE), an automated liquidity network aiming to aggregate resources for DeFi operations. 

The THORChain team announced it had suffered a sophisticated attack that minted fake assets and tricked the Bifrost cross-chain bridge to accept those assets. 

The team announced the attack had the marks of a white hack attempt, with the hacker demanding a bounty of 10% of the locked sum of $8M. The attack ended and was mitigated, but THORChain will temporarily close its ETH bridging mechanism. 

THORChain has suffered a sophisticated attack on the ETH Router, around $8m. The hacker deliberately limited their impact, seemingly a whitehat.

ETH will be halted until it can be peer-reviewed with audit partners, as a priority.

LPs in the ERC-20 pools will be subsidised.

— THORChain (@THORChain) July 23, 2021

Holders of THOR have not lost assets, but the news caused disruptions of the smart contracts, while also crashing the market price. 

THOR Traders Set Back

The market price of the underlying asset, RUNE, extended its slide ahead of the weekend. RUNE is now at $4.16, down more than 10% overnight. 

RUNE stood at above $20 during its peak in mid-May, only to crash with the rest of the market. Still, RUNE has established much higher volumes in the past months, at above $70M per day. RUNE has achieved highly liquid pairs with USDT, and trades on the Binance exchange with relatively low slippage. 

THORChain Network Shut Down

The THORChain network shows the latest blocks were produced in the early hours of July 23, with no new blocks and transactions for hours after that. The team announced it is working on getting nodes back online. 

The disruption has stopped multiple activities for RUNE, including liquidity pools, the Asgardex decentralized exchange, and swaps between native assets.

However, the RUNE asset still exists as a BEP-2 token on Binance Chain, with ongoing active transactions every few seconds. So far, RUNE had a plan B to continue centralized trading and possibly transfer some of the assets through their tokenized version. 

The presence of two versions of RUNE also poses a difficulty for new traders. RUNE from the Binance Chain can be held in multi-asset wallets, including TrustWallet, that support this type of token. Native RUNE should be held in the project’s mobile wallet. Swaps between the two may pose additional risk of error and loss, and may be disabled due to hacks. 

RUNE is also one of the assets where 25% of the tokens are locked in for liquidity pools or other staking options, slightly mitigating the problem of the THORChain network delay. 

Will the RUNE Crash Affect the Market

RUNE depends for more than 90% of its volume on its Binance pairings. Of those, the USDT pair takes up more than 60% of all volumes, with some trades left over against BNB and BUSD. 

RUNE trading is highly centralized. Due to the restrictions of Binance in the USA, the asset crash may be limited to international traders. RUNE is also relatively independent from other asset pairs, and its liquidity pools are only a fraction of the DeFi space. 

Can RUNE Recover for Stronger Gains

In the past, RUNE has had a run from prices under $1 to a peak around $20. Now, the 75% shakedown may be viewed as a trading opportunity. The return of block production and decentralized trading may boost RUNE, in addition to eliminating the vulnerability discovered by the hacker. 

RUNE has also shown it is capable of significant daily gains of as much as 30%. In the past week and leading up to the crash on Thursday, RUNE actually grew from lows of $3.10 to a weekly peak above $4.65. Those rallies remain appealing for traders looking for a fast turnover for a relatively liquid token.

Is THORChain Risky

The most recent attack against the THORChain network is not the first one for the protocol. THORChain has been ambitious in launching decentralized solutions and building up liquidity on its decentralized exchange. 

However, this has led to two known attacks in the past couple of months. The THORChain team reserved the right to shut down some of the services to mitigate the damage. 

At one point, the decentralized exchange powered by the protocol saw an attempted withdrawal of 4,000 ETH, later mitigating the loss to about $4.9M. 

An earlier attack took away around $140,000 in value in June. 

https://mobile.twitter.com/THORSwap/status/1409795633498755076

Using RUNE may thus lead to losses, as some users complain on social media. Still, the protocol is considered promising for decentralized trading and cross-chain bridging. THORChain has not lined up among the top DeFi assets. The price of RUNE shifts between the top 50 and top 100 DeFi tokens by market capitalization. 

THORChain, however, is not an outlier in attacks and exploits, as smaller rug pulls or liquidity pool attacks happen almost daily for smaller token-based projects. 

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