August crypto hacks reveal a new vulnerability in the Web3 ecosystem

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  • According to Certik firm, a blockchain security organization, crypto hacks significantly spiked in July, marking it as the worst month in the 2023 crypto market.
  • Curve Finance, a vital Defi organization, suffered a severe crypto hack, causing a loss of over $52 million in digital currency.
  • On August 25th, Magnate Finance, a popular borrowing and leading protocol based on Base, allegedly orchestrated a $6.5 million exit scam.

As we enter the final curtains of the year, 2023 has brought much change and scrutiny to the crypto market. Unfortunately, despite the tragedies of the 2022 crypto crash, the industry is still far from recovery. DeFi organizations, veteran crypto companies, and even blockchain startups still face challenges in preparing for the damage done. The threat of crypto hawks has plagued the 2023 crypto market as more fraudulent organizations try to escape the long arm of justice. However, eradicating crypto hacks is still a far-off dream despite the advancement in crypto security measures. Despite this fact, experts have managed to reduce the damage caused by hacker groups and individuals; throughout the year, the August crypto report shares a ray of hope, having the lowest number of crypto hacks within the year.

Crypto hacks are more common than you think.

The 2023 crypto market is the by-product of undefined crypto laws and regulators. The law’s vagueness to digital currency has allowed many to lose millions through crypto scams and hacks. 2022 ushered in a new era of scrutiny and fear in the industry, forcing several crypto companies to shut down.

During Q1 2023, blockchain security was a hot topic among crypto traders, organizations, and legal institutes. The ability to ensure the safety of the assets became a must-have component to resume normal operations. The situation steadily stabilized, but the threat of crypto crimes still looms over experts.

In March, the 2023 crypto market received a rude awakening as it suffered another major crypto hack. According to the reports, the Defi organization, Euler Finance, fell victim to a flash loan attack, resulting in a net loss of over $196 million. The DeFi organizations function under Ethereum’s blockchain network, resulting in heavy backlash from its users.

Also, Read Coinbase Exchange introduces its latest Layer2 network upgrade, the Base Blockchain network.

According to analysts, the attacker stole millions in DAI, USDC, staked Ether, and Wrapped Bitcoin. The exploiter found a vulnerability within their blockchain security system and gained access to multiple unauthorized functionalities. This allowed the perpetrator to sanction multiple transactions, marking the largest Crytpo hack in 2023, or so we thought.

These exploits proved the fears of many regulatory bodies, causing a frenzy of crypto lawsuits to emerge. The attention diverted from the crypto hak to the poor quality of blockchain security most firms had.

Unfortunately, this figure was trumped in July when the 2023 crypto market lost over $303 million in crypto hacks. 

According to Certik firm, a blockchain security organization, crypto hacks significantly spiked in July, marking it as the worst month in the 2023 crypto market. Curve Finance, a vital Defi organization, suffered a severe crypto hack, causing a loss of over $52 million in digital currency.

According to investigators, a vulnerability within Vyper, a popular blockchain programming language, significantly affected several DeFi and crypto organizations. Within the same month, another blockchain security vulnerability emerged from the blockchain bridging protocol, Multichain.

This minor flaw caused the organization to lose $125 million in digital assets. According to Ari Redbord, head of TRM labs,” DeFi protocols are the most vulnerable parts of the crypto ecosystem, adding that exploits are still happening at an “unprecedented” speed and scale.”

Currently marked as the worst period in the 2023 crypto market, investors lost $285 million in the crypto hack and $8.7 million in fraudulent flash loans.

August crypto hacks

Throughout the year, Defi Organizations, Crypto firms, and fintech companies have significantly struggled to float amid this crisis. The 2023 crypto market has been profitable to several within the industry but remains harsh to most organizations. Despite the gloom in July, the August crypto report shines a ray of hope for the market.

According to Immunfi, a blockchain security firm, August has the least losses to crypto hacks. According to the firms, the 2023 crypto market only lost $15.8 million to crypto hacks and exploits. Despite these losses, it significantly sheds light on the vital vulnerabilities within the industry.

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

Furthermore, many crypto hacks affected DeFi organizations. With blockchain technology steadily becoming mainstream, traditional finance companies have initiated a DeFi-based branch. This strategic move has significantly added to the globalization of Web3 but has brought in several issues. The August crypto report has clarified that no centralized Finance entities were affected, highlighting the several flaws within blockchain adoptions. 

Base suffered a crypto hack days after launching

The Base was a layer-2 network running under Coinbase’s blockchain network. The second largest crypto exchange launched this new feature on 9th August, causing a massive influx within the market. The Base was a secret plan anticipated for many years by the exchange. Unfortunately, since the Base was the first layer-2 network Coinbase launched it presented ample opportunity for exploitation.

Base-Coinbase
Base, the recently launched Layer Two network on Coinbase, suffered several blockchain security breaches moments after launching.[Photo/Crypto-News]
On the same day of launch, the Layer 2 network witnessed four blockchain security breaches shortly after going live. According to Coinbase, the attacker launched several brute force hacks on their server. Unfortunately, the hacker bypassed their security measure and stole over $860000 in digital currency. RocketSwap, the in-charge team from Base, announced an anomaly within their DeFi protocol.

The hacker managed to drain the project’s governance token RCKT and Wrap the Ethereum token. The platform said, “A brute force hack of the server was detected. Due to the proxy contract linked to our farm contract, multiple high-risk permissions became vulnerable. This resulted in the unauthorized transfer of the farm’s assets. We took immediate steps to shut down the farm and halt further potential risks.”

The team countered by halting most of its operations and redeploying a new contra t by dropping the proxy contract and open-sourcing it on-chain. The attack unfortunately did its damage, causing many to abandon the Layer 2 network, further sullying the reputation of Coinbase.

Exactly and the Harbor Defi organization hack

According to the August crypto report, Defi Organizations, the Exactly, and Harbor were exploited on August 18th. According to investigators, despite occurring on the same day, both accounts were not related. Blockchain security firms, DeDotFi and PeckShield, announced that the crypto hack on Exactly caused a loss of at least 4000 Ether worth at least $7 million at the time of writing.

The hacker then bridged 1,490 ETH across the Across Protocol and 2,832.92 ETH to the Ethereum network via Optimism Bridge. The crypto hack is still under investigation due to the severity of the attack. Initially, Exactly announced the attacker stole over 7160 ETH valued at least $12 million.

Also, Read 2023: A leap forward in blockchain security compared to 2022.

Harbor-Protocol
The Exactly and Harbor DeFi protocol have highlighted the significance of Blockchain security in web3[Photo/Harbor]
They revised this statement to a smaller amount, focusing on suspicious activities within the DeFi organizations. Exactly the organization said, “The attacker passed in a malicious market contract address, bypassing the permit check, and executed a malicious deposit function to steal assets deposited by users. The attackers stole approximately $7.3M.

On the same day, the Harbor disclosed a crypto hack resulting in the loss of several digital vaults; stOSMO, Luna, and Wmatic. Unfortunately, the DeFi organization did not disclose the size of the losses but clarified that investments were proceeding smoothly. According to the reports, the incident occurred when Cosmos, their parent blockchain network, introduced Brian Crain as its new CEO. 

Magnate Finance hacked 

On August 25th, Magnate Finance, a popular borrowing and leading protocol based on Base, allegedly orchestrated a $6.5 million exit scam. Magnate Finance had previously announced a new beta feature pending release this year.

Unfortunately, rug pulls are a common crypto scam that has eluded authorities for years. The general idea differs from ordinary crypto hacks but brings about the same damage. The prominent DeFi organization sleuth, ZachXBT, warned users that the Magnate Finance deployer address was a scam, but their warning came in too late.

Magnate-Finance
The Magnate Finance was one of the many exit scams that have exploited the growing DeFi franchise.[Photo/Ethereum]
On the same day of the announcement, Magnate Finance deleted the Telegram group foreseeing the projects and took its website offline. This raised plenty of concern over their investors, but the DeFi organization had already cleared their tracks. Magnate deleted its X(Twitter) account and removed all possible social media presence. Unfortunately, investigators discovered that Magnate Finance also had ties to another exit scam under Solfire, which caused a loss of $4.8 million.

In addition, its project developers manipulated the prices of the oracle of the protocol and removed all assets, collapsing almost $6.4 million of total value locked in the protocol.

Conclusion

The consistent lawsuits, hacks, and scams have shrouded the 2023 crypto market in turmoil as many participants struggle. Despite this trend, the year has also seen several improvements within the ecosystem. The August crypto report is among the few highlights of the year despite the losses.

Blockchain security is still a heated subject among many organizations. Ensuring optimum performance, and accessibility while maintaining standard security measures is not a simple task. Unfortunately, to move forward, crypto-based and Defi organizations must ensure security measures are a must-have if they hope to survive this current storm.

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Ken Mutuku
Ken Mutuku
I am an enthusiastic writer who believes that facts, knowledge and opinions can be expressed vividly with just a few words. I think that all forms of writing achieve this; hence I have a wide area of expertise and interest, such as cryptocurrency, psychology and the human mind.