Lack of liquidity mitigated damages to BonqDAO exploit: Report

In response to blockchain safety agency CertiK, the harm precipitated to decentralized protocol BonqDAO on Feb. 1 could have been a lot lower than initially thought. 

As advised by CertiK, the attacker first borrowed 100 million BEUR, a euro-pegged stablecoin, with lower than $1,000 in collateral resulting from an absence of controls on the collateralization ratio. If customers set the parameter to zero, then the platform defaults to returning the “most worth of uint256,” permitting an astronomical sum of loans to be issued.

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Nevertheless, CertiK stated that regardless of the attacker borrowing 100 million BEUR (round $120 million on the time of assault), the hacker solely managed to withdraw round $1 million resulting from an absence of liquidity on the platform. Beforehand, blockchain safety companies akin to PeckSheild acknowledged that round $120 million was misplaced throughout the assault.

Bonq is a fork of Liquity Protocol, which, just like that blockchain, makes use of Troves to symbolize remoted debt positions. Nevertheless, Bonq reportedly applied a Group Liquidation Function the place 45 Troves with BEUR publicity had been liquidated as a result of incident. In response to CertiK, the assault additionally impacted Troves containing roughly 110 million of AllianceBlock’s ALBT tokens. That stated, not one of the AllianceBlock good contracts had been breached throughout the incident, and the mission has stated it’s going to airdrop new tokens to compensate affected holders.

Bonq protocol was uncovered to an oracle hack, the place exploiter elevated the ALBT worth and minted massive quantities of BEUR. The BEUR was then swapped for different tokens on Uniswap. Then, the value was decreased to nearly zero, which triggered the liquidation of ALBT troves.

— BonqDAO (@BonqDAO) February 1, 2023

Though an absence of liquidity seems to have mitigated damages to BonqDAO throughout the incidents, others weren’t so fortunate. On Oct. 12, decentralized finance protocol Mango Markets initially misplaced $116 million after hacker Avraham Eisenberg manipulated the value of MNGO, driving it up 30x through monumental perpetual future contracts inside a brief interval. This was potential as a result of a comparatively small preliminary capital was required to control MNGO resulting from low liquidity. 

Associated: How low liquidity led to Mango Markets dropping over $116 million

Afterward, Eisenberg acquired a mortgage for $116 million utilizing $423 million of his inflated MNGO holdings as collateral and siphoned funds from the platform. On Dec. 28, Eisenberg was arrested in Puerto Rico on expenses of commodities manipulation and commodities fraud.