TL;DR
- Velocore Hack: Velocore, a decentralized exchange (DEX) on the zkSync and Linea blockchains, suffered a $2.6 million hack. The attacker transferred 700 Ethereum (ETH) to the Ethereum mainnet, exposing vulnerabilities in the crypto sector and emphasizing the need for robust decentralization.
- Block Production Halt: In response, Linea temporarily halted block production for about an hour to prevent further unauthorized fund bridging. However, critics argue that this decision contradicts decentralization principles.
- Linea’s Defense: Linea defended its actions as a “last resort” to protect users. The blockchain has resumed normal operations, emphasizing its commitment to a “permissionless, censorship-resistant environment.”
Velocore, a decentralized exchange (DEX) operating on the zkSync and Linea blockchains, fell victim to a hack resulting in a loss of approximately $2.6 million. The incident, which saw the transfer of 700 Ethereum (ETH) to the Ethereum mainnet, has raised serious questions about the vulnerabilities within the crypto sector and the need for robust decentralization.
🔊Update on Velocore Incident
The Velocore DEX was exploited. Our teams have been employing our ecosystem security measures to mitigate the damage from this attack. More info in this thread.
Linea network remains secure, this only affected a 3rd party dapp.
— Linea (@LineaBuild) June 2, 2024
The hack, initially flagged by a threat researcher, targeted Velocore’s liquidity provider tokens, crucial to the exchange’s operations. Despite having passed security audits by Zokyo, Hacken, and Scalebit, Velocore was unable to prevent the exploit.
In response, the Linea blockchain experienced a temporary halt in block production, lasting about an hour, to prevent further unauthorized bridging of funds.
This pause has sparked a debate on decentralization and censorship resistance within the blockchain industry. Critics argue that Linea’s unilateral decision to stop block production contradicts the core principles of a decentralized system.
Linea’s Defense: Protecting Velocore Users Amidst Decentralization Concerns
Mert Mumtaz, CEO of Helius Labs, and Alex Gluchowski, CEO of Matter Labs, have both emphasized the urgency for layer-2 solutions to prioritize decentralization.
Linea defended its actions, stating the halt was a “last resort” to protect users and prevent the hacker from selling a significant amount of tokens for ETH, which could have led to further issues. The blockchain has since resumed normal operations and reaffirmed its commitment to creating a “permissionless, censorship-resistant environment” in the future.
The community affected by the hack has demanded refunds from Velocore, which is working with centralized exchanges (CEXs) to freeze the stolen assets and planning an on-chain negotiation process. A post-mortem article is expected to provide more insights into the exploit mechanism and future safeguards.
This incident underscores the challenges faced by protocols in balancing security, decentralization, and scalability. It also highlights the slow progress towards decentralization in Ethereum layer-2 solutions and the need for immediate action to address these persistent vulnerabilities.
