As a seasoned analyst with over two decades of experience in the ever-evolving world of cryptocurrency, I’ve seen my fair share of ups and downs, hacks, and breaches. The latest Terra hack is a stark reminder of the inherent risks that come with investing in this space.
As a researcher, I experienced an unexpected pause in the Terra Luna chain operations on July 31, Wednesday. The suspected cause was a potential exploit, according to the official announcement made via their platform X (previously known as Twitter). This alerted us about the halt at block height 11430400, leading to an immediate cessation of all network transactions. During this period, our dedicated team of developers and validators were diligently working to resolve the issue.
Inside The Latest Terra Hack
“Terra Classic Users, Take Note: The system is set to pause temporarily at block number 11,430,400, meaning transactions won’t go through during this period,” was the warning given by Terra Classic. Additionally, they expressed concern about a potential security breach in Terra and pledged to take appropriate measures to address the issue. They further stated:
In simpler terms, we plan to collaborate with the validators on Terra (phoenix-1) to swiftly deploy a fix following the detection of a potential vulnerability.
An unknown assailant took advantage of a weakness found in a third-party tool called IBC hooks, which facilitates interactions and transfers between different blockchain contracts. This exploitation enabled the attacker to drain value from assets connected via bridges, potentially impacting tokens like USDC stablecoin and Astroport. Initial investigations indicate that approximately $5 million worth of tokens may have been involved in this incident.
The news about Terra’s hack caused a substantial decrease in the value of Terra Luna Classic (LUNC). After the announcement, its value dropped more than 4%. However, even with an initial drop, LUNC made a significant comeback. At the time of writing, the price of LUNC had decreased by approximately 2.84% to $0.00008116 on Wednesday.
Stolen Assets Report
In simpler terms, a significant security issue occurred on the Terra Classic blockchain because a known weakness hadn’t been fixed. This flaw was exploited by an attacker, enabling them to create tokens that had been transferred between different blockchains (Inter-Blockchain Communication) onto Terra. The emergence of this vulnerability in Terra coincides with critical bankruptcy deadlines for Terraform Labs.
Through the strategic use of a smart contract, IBC calls with related hooks, and a time-out feature, an attacker successfully bypassed security protocols to unlawfully obtain these digital tokens. This breach led to significant losses of assets such as 500,000 USDT and approximately 2.7 BTC. The Terra team is currently conducting a thorough investigation to understand the specifics of the exploit and to fix any identified vulnerabilities.
In this scenario, the exploitation unfolded step by step. First, a smart contract was initiated on the Terra blockchain. Subsequently, an Inter-Blockchain Communication (IBC) transfer was executed, which unfortunately timed out. This timeout, however, facilitated the transfer of tokens into the account belonging to the attacker.
Although the exploiter’s wallet never held more than 56 LUNA and $7,800 in USDC simultaneously, they still walked away with a substantial fortune equivalent to millions of dollars in assets. The Terra team is actively investigating this incident to uncover its complexities and implement measures to avoid similar occurrences in the future.
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2024-07-31 10:35