bZx DeFi Protocol Under Attack, More Than $1 Million ETH Compromised

The bZx DeFi protocol got seriously hit this week after the entire decentralized finance space got under attacks and the compromised funds lost more than $1 million as we are reading further in the Ethereum news today.

The first attack happened four days ago, right after Valentine’s day according to the official reports from bZx. According to the document, the attack was launched during ETHDenver and at that time bZx’s team has been out attending the event, so block 9484588 was hit hard.

The attack took advantage of the bZx DeFi protocol to lend and swap a huge amount of ETH and wrapped bitcoin which represents a token being launch on the Etheruem network while tracking the price of Bitcoin. This allowed the attack to manipulate the prices and to profit off of the decentralized leveraged trade. At first, the attack took 10,000 ETH from dYdX which is a decentralized lending protocol. He used about half of that to collateralize a loan for 11 wbTc on another lending protocol.

The attacker later spent 1,300 ETH to open a 5x leveraged ETH/BTC short position on the Fulcrum trading platform while borrowing 5,673 ETH through the Kyber platform. This amount he swapped for 51 wBTC which caused a massive slippage. This allowed the attack to make huge profits from swapping the 112 wBTC from compound to 6,671 ETH and to make an income of 1,193 ETH which reaches a sum of $318,000. At the end, the attacked paid back the initial 10,000 ETH on the dYdX platform. The team also confirmed the second attack:

According to the official reports, the attacker managed to acquire a net profit from the system of around $600,000 and bring the losses to more than $900,000 worth of ETH but the mechanism of the second attack was much more different than the first one. The problem was the oracle manipulation. Oracles represent centralized components that provide external information to the on-chain apps. The bZx team also stated that they are working with Chainlink and other providers to create ‘’ more robust oracle and reduce the surface area of attacks against our protocol.’’

The bZx DeFi protocol managed to postpone the realization of the profits from the second attack and stated that they believe ‘’the system can recover from this.’’