Hacks Still Top Threat for Exchanges, DeFi
The abundance of cryptocurrency exchanges and decentralized protocols once again raises the issues of hacks, after last week’s high-profile losses.
At the top of the list, the $100M Bitmart hack lined up among the biggest exchange attacks. Mostly Ethereum-based assets were transferred out of the exchange, affecting user wallets and balances directly.
Bitmart claims it has recovered its functionality and has continued business as usual with other asset trading. However, the exchange is relatively risky and a venue for more volatile altcoins.
Safemoon Survives Hack Sell-Off
The Safemoon (SAFEMOON) token, a sub-penny asset, also saw a trading anomaly at the time of the Bitmart hack.
SAFEMOON crashed after apparently a whale dumped coins on the market. Despite the low price of $0.000001517, SAFEMOON recovered its previous positions from the deep losses. The asset is extremely volatile, especially on the slim volume exchange.
However, Bitmart was an important trading venue that also invited the Safemoon community to buy the dip and recover prices.
The Safemoon project has not been directly affected, but underlines the danger of holding less liquid coins.
SAFEMOON will also evolve after migrating to a V2 network, with a potential upside to price action. The asset has not been listed on major exchanges and the community is still building up acceptance.
Price Anomaly Puts Billions in Balances
Another recent anomaly involved CoinMarketCap, the leading source of information went through a glitch that displayed exorbitant prices for all digital coins and tokens.
So far, no problems with price information have been detected, with the exception of Coinbase wallet holders.
Decentralized Protocols Also in Danger
One of the recent hacks affected AscendEX, a newly created exchange with the potential to serve global traders. The exchange saw an attack against its hot wallets, affecting three widely used blockchain.
Peckshield data estimate the losses at close to $80M.
Because Ethereum, Polygon and Binance Smart Chain also carry multiple tokens, the hack turned out to be more complex, with smaller assets affected.
One of the assets was the BOND token, for which the exchange promised to reimburse holders.
Orion Protocol (ORN) tokens were also affected.
While the losses are small against the overall size of the digital asset market, they underline the risk of supporting smaller projects or attempting to trade more obscure altcoins. For some of the coins, an exploit can freeze trading temporarily and stop price discovery.
NFT Mints May Lead to Losses
The newest fundraising and marketing tool for new cryptocurrency projects is an NFT mintp. Based on the previous success of collections like CryptoPunks and Bored Apes, mints entice with the opportunity of early access to potentially valuable digital items.
In addition to collections, new projects also promise items for upcoming games. But just like in past token sales, multiple projects turn out to be scams or rug pulls, where the team liquidates the assets and disappears.
Joining new projects may have its upsides, but it is the riskiest part of the cryptocurrency market. Trading new NFTs may be illiquid and the promised games may never materialize.
At the same time, play to earn tokens are starting to become a significant group of assets, with Axie Infinity (AXS) remaining highly liquid, with prices close to $100.
Vulcan Forged Produces Tainted Wallets
One of the most recent hacks of a live project involved Vulcan Forged, a working decentralized app. The project offered a wallet creating function, but ended up exposing user private keys to a hacker.
All affected wallets were drained of all assets. Vulcan Forged has advised its players to build new wallets and reimbursed the balance from its treasury.
The Vulcan Forge hack is estimated at $140M from 96 wallets. The theft affected 4.5M PYR tokens, the native reward token of the Vulcan Forged ecosystem. However, despite the attack, there are expectations PYR can recover and grow. The news of the hack caused a fast crash of 30% for PYR, which now trades around $23, after a 50% loss in the past two weeks caused by the prevailing market mood.
This time, the team was involved directly in solving the exploit, also intervening to make the stolen funds worthless. Vulcan Forged is built on Polygon’s network, and allows for more centralized control of the assets. This also allowed for the creation of a wallet-as-a-service product, which in turn compromised the private keys for brand-new wallets.
NFTs have also been the object of thefts with attacks happening through automated wallet connection and signing. The best approach is to avoid connecting browser wallets to dubious apps, while also disabling the automated connect function. Stolen NFT collectibles can also be blacklisted and removed from future auctions.
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