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Poly Network Faces the Most Significant Theft in the Crypto Space.

DeFi space is pretty vulnerable to cyberattacks. To prove this statement, there occurs another attack in DeFi space and, this time on Poly Network. The attack is said to be the biggest ever theft in the crypto space, where more than $600 million has been stolen.

The attack was disclosed by Poly network itself on Twitter, where the team urged the hackers to return the assets and talk to the Poly Network team for a solution. In another tweet, the team also disclosed the assets which were hacked along with the hacker’s addresses. The stolen assets include $253 million in tokens on BSC, $85 million in USDC and $ 273 million ETH tokens.

Notably, Poly Network is a DeFi platform that facilitates P2P transactions, which was launched by the founder of Neo. It operates on Polygon, Binance Smart Chain and Ethereum Blockchains.

Hackers started returning the theft funds and conducted AMA

It is being said that the hackers return more than one-third of the theft funds. Cryptocurrencies worth almost $260 million are already returned to the Poly Network. The exciting thing is that the hacker himself said that it was never a plan to steal the funds. They did the hack to expose the vulnerability in the network before anyone else could exploit it. 

It cannot be said whether the messages are authentic because their authenticity couldn't be verified. Secondly, the hackers have not been identified yet. It all happened after the Poly Network team asked them to return the funds if they don't want any legal actions.

Using embedded messages in the Ethereum transactions, the hacker has conducted an AMA (Ask Me Anything). During the AMA, the hacker responded that the hacking was just for fun and because he finds cross-chain hacking pretty hot.

Although hackers' intentions cannot be decoded, it is evident that laundering crypto assets is never an easy task. It is due to the fact that blockchain is quite transparent, so even one can hack the system to steal assets, he still cannot quickly cash them out.

What was the major root cause of the attack?

The root cause of the attack was that the specific cross-chain transactions could be executed by the verifyHeaderAndExecuteTx function of EthCrossChainManager. Let’s understand this briefly.

EthcrossChainManager contract is the owner of EthCrossChainData, which means the keeper of the contract can be modified by EthCrossChainManager. For this modification, it just needs to call the putCurEpochConPubKeybytes function of the EthCrossChainData contract. And the verifyHeaderAndExecuteTx, which is a function of EthCrossChainManager, can perform the cross-chain transaction by calling the function executeCrossChainTx.

It means that the attacker was only required to pass the data through the verifyHeaderAndExceuteTx function for changing the keeper role to address specified attackers. The change in address can allow the attacker to construct a transaction anytime, which can withdraw any amount of funds.

What should we learn from the attack?

Recently on August 3rd, a hacker attacked Popsicle Finance, a decentralized liquidity provider. Now, on August 10th, there occurred an attack on Poly Network. What do these frequent cyberattacks suggest? Well, it is pretty clear that the crypto space doesn't have a sufficient security layer.

The Decentralized finance projects are often produced very quickly where the team doesn't thoroughly check the code. It leaves vulnerabilities, which later can be exploited by hackers. Every DeFi protocol has a different mechanism to lock their funds and to get rewards. Sometimes, what happens is that the founders cannot understand how those mechanisms can be abused and become the most significant loopholes.

If we think carefully, we can say that this kind of attack can probably hinder the growth of crypto space because these can be discouraging for the people investing in the crypto market.

It is merely speculation whether we can prevent the hacks or not. But there are specific preventive measures that should be taken to avoid cyberattacks in future.

The preliminary step is to trace past activities, which can effectively detect the suspicious retroactive activity. Additionally, there should be security audits of smart contracts, which can make room for vulnerable contracts.

Closing Thoughts

DeFi space indeed is revolutionizing the financial world with its trustless tools. But, the primary concern is still security. The increasing cyberattacks in the crypto space can build up an environment of fear in the individuals, which further can inhibit the growth of the space. Hence, it becomes indispensable to increase the security of DeFi space to prevent such attacks in future.