$372 000 USD

AUGUST 2020

UNITED STATES

OPYN

DESCRIPTION OF EVENTS

"Opyn is a generalized noncustodial options protocol for Decentralized Finance, or DeFi." "Opyn is a capital efficient DeFi options protocol that allows users to buy, sell, and create options on ERC20s. DeFi users and products rely on Opyn’s smart contracts and interface to hedge themselves against DeFi risks or take positions on different cryptocurrencies."

 

on February 10th, "[t]he team asked [OpenZeppelin] to review and audit the system. [They] audited commit c34598565cba2bfcf824eb2da63d95c7f5dda4fa and the contracts included in the scope were: OptionsContract.sol, OptionsUtils.sol, and OptionsFactory.sol. The scope did not include the files inside the lib folder, Migrations.sol, and the OptionsExchange.sol. All external code and contract dependencies were assumed to work correctly. Additionally, during this audit, [they] assumed that the administrators are available, honest, and not compromised."

 

"Opyn experienced a double-spend attack on its Ethereum put options, resulting in the loss of at least $371,000 in user funds." "The vulnerability was connected to the protocol’s native tokens called oTokens, which users burn when exercising options contracts. The contract couldn’t correctly exercise a batch of options, not burning oTokens at each closure." "Consequently, an attacker could reuse their oTokens balance and drain funds by exercising options for free."

 

"At least 371,260 USDC were lost because of the double-spend attack on its Ethereum put options." "ETH put contracts were affected by the attack. The hacker used an exploit in Opyn protocol’s options tokens (oTokens) to steal collateral from users who sold these ETH puts." "This hack was done by calling exercise() with more than two vaults with ETH as the underlying assets. Since the implementation treats the same batch of ETH received as multiple batches of ETH receptions, the hacker re-uses that batch of ETH to retrieve the collateral USDC and make profits." "The team secured 572,165 USDC from its contract, but the hacker still got away with 371,260 USDC."

 

"Opyn officially issued an update on the ETH theft incident caused by platform loopholes and will fully compensate ETH put option sellers affected by the loophole. For buyers of ETH put options, the put options are redeemed at a price 20% higher than the market price."

 

"The team reacted responsibly to the attack, promising full reimbursement for ETH put oTokens sellers who lost money in the hack. For purchasers of ETH put oTokens, the team offered to buy the tokens with a 20% markup on Deribit to compensate them for damages." "In its latest report, the team stated that it would review its internal security and testing practices while increasing its bug bounty rewards." "While security firm OpenZeppelin [had] audited the [original] contracts, the exploit was outside of the audit’s scope." "According to PeckShield, a blockchain security company, a person with smart contract programming experience could easily spot the bug."

 

"While the Opyn team couldn’t take down or change the smart contract, it managed to put the protocol on hold and save some of the users’ funds. On top of that, it announced reimbursements along with smart contract audits." "[A]ll ETH put sellers [were ultimately reimbursed] in full."

Despite a security audit by OpenZeppelin, Opyn's smart contract for oToken put options continued to be vulnerable.

 

The hacker got away with funds, which the Opyn team reimbursed for affected users.

HOW COULD THIS HAVE BEEN PREVENTED?

While multiple audits would have reduced the possibility for this issue to avoid detection, exploits have occurred in highly audited platforms.

 

Offline multi-signature storage of funds has not experienced similar breaches.

 

Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

 For questions or enquiries, email info@quadrigainitiative.com.

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