Decentralized Futures Exchange Cypher Protocol Suffers $1M Exploit

Decentralized Futures Exchange Cypher Protocol Suffers $1M Exploit
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Cypher Protocol, a decentralized exchange operating on the Solana (SOL) blockchain, suffered a security breach on Monday, resulting in an estimated loss of around $1 million. In order to mitigate further damage, the protocol has halted its smart contract.

On August 8, Cypher Protocol took to X (formerly Twitter), confirming the attack and reassuring that its team is working with individuals and investigating the exploit. The protocol also addressed the hacker by asking if they would be open to speaking with the Cypher Protocol team to negotiate a potential return of stolen funds.

How did the Cypher Protocol Hack Happen?

According to data from Solana blockchain explorer Solscan, the wallet linked to the exploit had stolen 38,350 SOL and 123,184 USDC, amounting to roughly $1,035,203 in unauthorized transactions. In the following hours, the alleged wallet transferred $30,000 to another address “kiing.sol,” with the potential goal of liquidating the stolen funds.

Additionally, analysts at blockchain security firm Beosin found that the hacker’s wallet was funded from centralized crypto exchanges KuCoin and Binance. Since the exploit, members of the cryptocurrency community sent a series of non-fungible tokens (NFT) to the suspected wallet, asking the hacker to return the stolen funds. Among the various messages, one read,

“Seriously though, you used Binance and KuCoin to fund and to try and get 30k out. People will find you. Please do the right thing and give the rest back.”

The recent security breach coincided with Cypher Protocol’s collaborative mtnDAO hacker house event, which they co-hosted with another Solana protocol, Marginfi. Ensuring clarity and dispelling doubts about their own security, Marginfi swiftly relayed via their Telegram channel that they remained unaffected by the breach and continue to maintain their operational independence from Cypher.

How did the Cypher Protocol Hack Happen?

Crypto-Related Hacks Down 58% in 2023 Compared to 2022

The cryptocurrency market has made great leaps in terms of price performance in 2023, but so have malicious entities. Hacks and network exploits continue to plague the crypto sector. Recently, security audit firm CertiK revealed Crypto traders have lost a staggering $303 million worth of digital assets in cryptocurrency exploits and hacker attacks in July, making it the worst month this year so far in terms of stolen value.

However, compared to the second quarter of 2022, when hacks and exploits took $745 million, the security firm pointed out that there was a 58% decline in the amount lost. This suggests that the industry has been actively addressing these challenges and implementing proactive security measures.

On the other hand, as the number of crypto hacks surged in an alarming fashion, a surprising trend began to emerge from hackers as they now started returning the stolen funds. Over the recent past, hackers have been progressively returning the stolen funds, opting instead for a “white hat” reward offered by the compromised projects. In 2023, some victims of these crypto exploits managed to recover nearly half of the purloined funds.


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