DeFi lending protocol Abracadabra has suffered a security breach, resulting in a loss of $6.5 million. The cyber-attack involved manipulating specific V3 and V4 cauldrons on the Ethereum network, enabling unauthorized loans in the native stablecoin MIM, which were subsequently exchanged for Ethereum (ETH), according to Peckshield, the security firm that detected the anomaly.
In response to the attack, Abracadabra has a temporary freeze in place by setting borrowing limits on the affected cauldrons to zero to mitigate further risks. Additionally, the team has proactively reached out to the hacker with an onchain message, proposing a bounty in return for the stolen funds.
MIM is currently trading below its targeted $1 peg by approximately 6%. To address this devaluation, Abracadabra's strategy includes utilizing the protocol’s treasury to purchase and eliminate some of the outstanding MIM, aiming to stabilize its market value, which has a capitalization near $55 million.
Similar to MakerDAO's vaults, Abracadabra allows users to loan MIM against diverse crypto assets using mechanisms known as cauldrons. The Abracadabra team is collaborating with blockchain analytics expert Chainalysis to trace the stolen assets.
Our Opinion:
If you are investing in such platforms, it's essential to ensure their security through comprehensive audits and stress testing.
To reduce risks, diversify investments among various protocols and monitor their updates closely, especially ones relying on complex smart contracts. An incident response plan is also critical, as Abracadabra's quick actions post-exploit show. Investors should have clear risk thresholds and robust monitoring to react promptly to any anomalies. Employing security specialists and analytics tools may aid in early threat detection.
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