Exploits in Decentralised Finance
Welcome everyone.
We're addressing the recent DeFi platform Curve Finance exploit, which resulted in a significant loss of over $70 million in funds. Regrettably, this isn't the first or the last hack in this space. This article aims to shed light on these incidents and ways to mitigate such risks.
The exploit on Curve Finance was due to a day-zero vulnerability found in Vyper, the coding language Curve partially uses.
Despite some funds being intercepted by white-hat hackers, the damage to Curve's reputation was considerable, leading to over $1.5 billion in withdrawals.
The implications of this exploit extend beyond Curve. The bug was in the coding language itself; hence, other smart contracts could be at risk. Considering the interconnected nature of DeFi, platforms like AAVE could be negatively impacted due to the steep fall in CRV's value. So, we would like everyone to stay careful.
We, at 512m, fortunately, have not experienced any compromises in our pools or strategies. However, we would like to share a few measures we implement to safeguard our position and reduce potential exposure to hacks:
1) We distribute our positions across multiple blockchains, layer 2s, and protocols. Additionally, we thoroughly examine each protocol's origins and the teams behind them. Several projects are mere forks of older protocols, often inheriting the same vulnerabilities.
2) The maturity of a protocol and whether its codebase has been audited is of utmost importance to us. We appreciate platforms that offer bug bounties as it encourages white-hat hackers to identify potential threats. For instance, Curve Finance offered up to $250k for identifying major vulnerabilities.
3) Following experts in the field and not getting swept away by exceptionally high yields, innovative business models, or rapidly increasing Total Value Locked (TVL) is crucial. We can recommend Exponential DeFi as an excellent source for understanding and keeping track of risks.
4) Finally, it's crucial to acknowledge that, despite all precautions, there is always a degree of risk involved. No protocol or yield source is completely immune to potential exploits. It's about staying vigilant, proactive, and keeping informed to manage these risks effectively.
We at 512m will continue our efforts to minimise exposure to such vulnerabilities and ensure the maximum possible security for our funds. Let's navigate the complexities of the DeFi world together. Stay tuned for more updates.
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