In perhaps an unsurprising turn of events, Sovryn, a Bitcoin-based defi protocol lost a lot of money to an exploiter who took advantage of a legacy function. Keep reading to learn more about what happened.
More than $1.1 million stolen from Sovryn defi protocol
October 4, 2022https://t.co/VPcHd6I1O1 pic.twitter.com/mphpYzLfiq
— web3 is going just great (@web3isgreat) October 6, 2022
A tweet from the aptly named @web3isgreat reported this news, as well as on their official website. The report is as follows:
Bitcoin-based defi protocol, Sovryn, lost $1 million to a price manipulation attack. An exploiter was able to use the project's legacy lend and borrow functionality to maliciously withdraw 44.93 RBTC (~$915,000) and 211,045 USDT.
According to the protocol, their developers “were able to identify and recover funds as the attacker was attempting to withdraw the funds”. They have also announced that Exchequer, the project's treasury committee, would “reinject” the remaining stolen funds.
For those not in the know, let's break down their statement bit by bit. Bitcoin is one of the world's leading cryptocurrencies and is arguably the one that started it all. Decentralized finance, or DeFi for short, refers to any form of finance that's based on the blockchain. These finance systems, as the name implies, don't rely on central financial intermediaries. Examples of these intermediaries include banks or brokerages. The blockchain is basically a decentralized ledger that keeps track of peer-to-peer transactions.
To summarize what the report says, a hacker was able to use an old function in Sovryn to manipulate prices. Once the hacker did it, they withdrew a whole lot of cryptocurrency from the service. The withdrawn amount reached $1.1 million worth. The developers, however, were able to recover the funds and are currently placing them back into their treasury.
While this may look like a done deal, that's not really the case. Decentralized financial networks are all the rage now on the internet. You've probably seen so many Twitter posts talking about how this cryptocurrency or that DeFi will become the next big thing. However, it's not worth it. As can be seen here, people can lose a lot of money in seconds. This isn't the first time that a large hacking has happened that led to the loss of so much money. Just this year, the Ronin Wallet was hit by an exploit, resulting in massive losses. Imagine the thousands, if not millions of people, all suddenly losing access to their money.
What the hacker did is not the only exploit present in this environment. Cryptocurrency, specifically play-to-earn crypto games, is already under fire for what is basically exploitation. People who don't know anything about the system are attracted to the promise of easy money without doing much. More often than not, this leads to them losing money, without even knowing what went wrong. And now with the existence of Web3, and the people who are pushing for it, there is a real danger of even more people falling for the empty promises this brings.
Although the Bitcoin-based Sovryn defi protocol developers said that it was all taken care of, it doesn't change the fact that it happened. Although the lost money is back in the system, the damage is already there. Decentralized financial systems, cryptocurrency, and Web3 are not the way forward. The only people who stand to gain from this are those who are above everyone, those that manage these systems themselves. Everyone else is just collateral damage.
Be careful when engaging in anything related to all of this. Do your research, and don't believe their words easily.
If you want to learn more about the specifics of this incident, head here.