Balancer Unveils Initial Post-Mortem Report Following $116 Million Hack

The Balancer team, creators of a decentralized finance (DeFi) protocol, released a preliminary report on the recent hack that led to the loss of $116 million from various DeFi markets. The report explains the methods used by the hacker and emphasizes the importance of security in the crypto space.

Key Takeaways

Balancer’s hack resulted in a loss of $116 million, primarily from its v2 Stable Pools and Composable Stable v5 pools.
The hacker exploited a combination of BatchSwaps and vulnerabilities in the rounding function.
The incident highlights vulnerabilities in hot wallets and liquidity pools, urging caution among crypto users.
Balancer collaborated with cybersecurity experts to recover some stolen assets and paused affected pools.
A 20% bounty offered for returning stolen funds remains unclaimed.

Balancer releases preliminary post-mortem report after $116M hack

Hack Overview: The Breach of Balancer's Security

On Wednesday, the Balancer team published a preliminary report that details the hack, which occurred on Monday and exploited vulnerabilities in Balancer v2 Stable Pools and the Composable Stable v5 pools. Thankfully, other types of pools were not affected.

The hacker employed a sophisticated strategy that involved using BatchSwaps—a feature that allows users to combine multiple actions into a single transaction—along with flashloans, which are brief loans that must be repaid within that same transaction. This process targeted a vulnerability in the upscale rounding function specifically related to EXACT_OUT swaps within the Stable Pools.

Cybercrime, Cybersecurity, Hacks
Source: Balancer

The rounding function is designed to round down token prices. However, the hacker manipulated these rounding values, effectively draining funds from the stable pools through the BatchSwap feature. The team remarked that this incident underscores the risks that hot wallets and liquidity pools face from constantly evolving cybersecurity threats, provoking a call to action for both crypto users and blockchain developers to enhance their security measures.

Related: Balancer's audits have come under scrutiny following the $100 million exploit.

Balancer's Response to the Cyber Attack

The hacking group appears to consist of well-prepared professionals who meticulously planned the attack for months. They utilized small Tornado Cash deposits of 0.1 Ether to finance their operations discreetly.

In an effort to recover some of the stolen assets, Balancer sought assistance from cybersecurity professionals and other crypto protocols and successfully froze or reclaimed a portion of the stolen funds. This includes 5,041 StakeWise Staked ETH (osETH), valued at approximately $19 million, as well as 13,495 osGNO tokens, worth around $2 million.

Cybercrime, Cybersecurity, Hacks
Source: BitFinding

To address the situation, the Balancer team has temporarily paused all affected pools and halted the creation of any new pools that could potentially have similar vulnerabilities until the security issues are resolved.

Additionally, Balancer offered a 20% bounty to ethical hackers and the original attacker in exchange for the return of the embezzled funds. However, as of now, this bounty remains unclaimed.

Magazine: The ‘SEAL 911’ team of ethical hackers has been assembled to combat real-time crypto hacks.