Solana (SOL) Wormhole Fixes 120K Ethereum (ETH) Exploit
The Wormhole bridge service moving tokens between Ethereum (ETH) and Solana (SOL) suffered an exploit that took 120,000 ETH.
The Wormhole exploit was one of the biggest in the past months. In 2021, overall bridge and DeFi exploits went above $680M in total, with individual exploits much lower in comparison to the latest heist.
The Wormhole bridge was exploited and a hacker managed to take away all of the 120,000 ETH held within the smart contract. Analysis of the transactions discovered that the hacker had enough knowledge of the Solana protocol and created faked transactions which were then approved as real. This led to the creation of 120,000 wrapped ETH on Solana, which the went through the Wormhole bridge and were recognized as a real transaction.
The ETH taken away is perfectly real, but this means anyone that deposited the tokens has no recourse to take them back. The entire loss is estimated at around $320M and lines up among the biggest smart contract exploits.
The Wormhole exploit arrives after a year of significant losses from DeFi projects, including exploits of the bridges for projects like ThorChain where about 13,000 ETH were taken from the smart contract.
Solana (SOL), one of the hottest tokens in 2021, had its share of technical flaws in the past year. The Solana protocol had to stop more than twice in the past year, showing some vulnerabilities.
Wormhole Replenishes Bridge Contract
A few hours after the attack, the Wormhole bridge announced it had resumed operations. The 120,000 Wrapped ETH on Solana now have real backing with ETH held within the smart contract.
However, this does not mean the funds were returned by a white hat hacker, and instead, Wormhole found a way to replenish the contract. The Wormhole team has not given details on the source of ETH, but at least currently all deposits can be withdrawn again.
How the Hack Affected SOL
SOL immediately sank toward $97.64, climbing to $105.05 later. But SOL may not be the only token to be affected. The ETH locked in the smart contract went into multiple projects built on Solana, including DeFi projects and other types of collateral pools.
This means any tokens backed by ETH and running on Solana may not have the entire backing that was promised.
DeFi Llama data shows the total value locked on Solana fell significantly in the past 24 hours. TVL is down more than 14%, to $7.44M. Most big protocols lost as much as 15% in their total value locked in the past day. The loss is partially due to the overall market slide, where the latest dip of Bitcoin (BTC) under $37,000 continued to put pressure on all projects.
Solana has hosted multiple decentralized exchanges, NFT sales, crypto lending and other projects that channel the value of ETH.
Will ETH Fall Further
ETH prices also fell in the last day, though it is uncertain if the actual stolen tokens had an effect. ETH traded around $2,664.29, mostly affected by the overall market weakness and low volumes.
The Wormhole bridge did not receive its funds back, and it is also possible for the coins to be moved in some form.
Will SOL Recover
No SOL was actually stolen, but the temporary loss of the Wormhole protocol may extend its effect in the coming days.
SOL has a wide influence on traders and has built a significant community, especially for NFT traders. In the past 12 months, Solana has logged between 1.8M and 2.3M active wallets, while doing up to 2,500 transactions per second.
Solana has also faced problems with wallet exploits, where websites manage to extract tokens and NFT collections.
So far, the Solana team has not officially commented on the hack, leaving the problem to be solved by the Wormhole startup. The flaw lies in the way the Wormhole protocol was built, and the team claims it has patched the flaw for this specific bridge.
Wormhole holds in a total of $1.5B in value, while also bridging Avalanche (AVAX) and Terra (LUNA). The Wormhole team has also worked on a native swap between ETH and Polygon (MATIC). No exploits affecting other networks were reported.
Will Solana be Able to Carry Payments
Despite the potential flaws with its smart contracts, Solana continues on its ambitious goal to use its blockchain for fintech payments. Solana Pay aims to move transactions in both crypto and wrapped US dollars and other currencies.
The Solana technology may be different from the approach of Wormhole, and there is no way to predict the type and application of smart contracts.
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