Cover Protocol Attack Perpetrated by 'White Hat,' Funds Returned, Hacker Claims
The exploiter has cashed out over $4 million including about 1,400 ether, one million DAI and 90 WBTC.
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 exploiter has cashed out over $4 million including about 1,400 ether, one million DAI and 90 WBTC. The attacker earlier created 40 quintillion COVER tokens and sold $5 million worth of them on Monday morning. More than $3 million has 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.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.