Hackers Stole Over $450,000, Exploiting A Flaw In Arcadia Finance

By taking advantage of a flaw in the programming, a hacker stole about $455,000 from the noncustodial decentralized finance (DeFi) protocol Arcadia Finance.

PeckShield, a blockchain investigator, alerted about the Arcadia Finance attack, citing "the lack of untrusted input validation" as the root reason. The code allegedly lacked a cross-checking validation method for inputs that had not been checked. Through this flaw, the hacker was able to steal money from the Ethereum (darcWETH) and Optimism (darcUSDC) vaults, totaling about $455,000.

Source: PeckShield

The request for comment on the hack has not yet received a response from Arcadia Finance. The developers, however, informed that the PeckShield-identified fundamental cause is incorrect.

„We are aware of a potential exploit in our protocol. We have paused the contracts and are investigating the root cause with security experts as we speak. More info will follow as it comes available.“ Arcadia Finance tweeted.

While the investigations are ongoing, Arcadia's code contains another vulnerability that, if used, may have disastrous effects on the protocol. As stated by PeckShield:

“In addition, there is a lack of reentrancy protection, which allows for the instant liquidation to bypass the internal vault health check.”

About 180 Ether (ETH) or the majority of the stolen money came from Optimism and was cleaned via Tornado Cash. The stolen Ethereum coins, which are currently valued at more than $103,000, are still parked at the alleged wallet address.

Over $300 million was lost as a result of hacks and exploits in the crypto industry during the second quarter of 2023.

According to research by the blockchain security firm CertiK, 212 security issues totaling $313,566,528 from Web3 protocols were detected in the quarter. According to data from Q2 of the previous year, 58% fewer crypto attacks occurred. The BNB Smart Chain had the most incidents of the group, with 119 incidences totaling losses of $70,711,385.

Is DeFi alive?

The DeFi market has to cope with an unpleasant truth—DeFi is in serious trouble. Numerous measures support this. Looking at the total value locked (TVL) in DeFi is the simplest. The sector has lost 75% of its entire value locked since 2022.

A very slight increase in TVL was seen at the beginning of 2023. The volume on DEXes is another measure that is worthwhile to have a look at. Exchanges that operate independently are thought to be the most potential vertical in DeFi. However, even they could not withstand the bitter winter winds of DeFi.

However, Ethereum transaction costs have significantly lowered as a result of layer-two chains (Arbitrum, Optimism, Polygon) and app chains (dYdX) accepting transactions from the mainnet, which may bring DeFi to a new life.

In 2023, Ethereum scaling will continue with new improvements following the merge and more money flowing to L2s. Even if they don't operate on the Ethereum mainnet, DApps will become more accessible (and less expensive to use) as blockchains grow more integrated.

The spot volume on decentralized exchanges remained stable even during the DeFi winter of 2022. That's encouraging for the future, when money starts flowing back into DeFi, especially in light of how hard CeFi was hammered during the down market.

Who are the DeFi leaders in 2023?

Since no one else can outperform Uniswap, the market leader DEX, it continues to be in charge. Competitors like Sushiswap are too preoccupied with internal problems to match their value offerings. Due to its capacity to offer concentrated liquidity and its emphasis on working capital requirements, Uniswap continues to be the only billion-dollar DeFi protocol. Despite Messari's estimate that bots account for 70% of all network traffic, Uniswap benefits from this as well. The network can accommodate a reduced LP take rate, boosting UNI's cash on hand.

Bull or bear, Curve maintains a consistent 10-15% portion of the DEX volume. The Curve Wars story has partially subsided, but the exchange still offers a distinctive value offering and hasn't lost any market share to rivals.