The decentralized finance (DeFi) insurance project Cover Protocol was hacked earlier Monday in an infinite printing scheme, causing the price of the COVER token to plunge. Hours later, Grap.Finance, a "white hat hacker" claimed responsibility for the attack via their Twitter account, saying all funds had been returned.
The price of COVER has plummeted to $177 by over 75% over the last 24-hour period, according to the data from CoinGecko.
Cover Protocol later announced it was exploring launching a new token through a snapshot "before the minting exploit was abused."
"The 4350 ETH that has been returned by the attacker will also be handled through a snapshot to the LP token holders. We are still investigating," according to the project's Twitter account, which urged users not to buy any COVER tokens now.
Sorawit Suriyakarn, chief technology officer at Band Protocol, said the exploit's approach appears to be relatively new and was not spotted in any recent attacks.
"The attack does 4 things: 1. Deposit LP tokens to Blacksmith contract 2. Withdraw *almost* all LP tokens to inflate 'accRewardsPerToken' 3. Deposit LP tokens again (this is the interesting bit) 4. Claim COVER rewards and trick the contract to mint quintillion of $COVER tokens," Suriyakarn said in his tweet.
The hacker tricked the protocol into minting new tokens as rewards by exploiting a bug in the smart contract Solidity, which involves using memory and storage incorrectly in the programming language.
The Cover DeFi protocol, designed as an insurance product that could help users reduce smart contract failure-related risks, merged with Yearn.Finance a month ago.
This story is developing and will be updated
Update: This story was updated with new information about Cover's latest announcement at 16:25 UTC.