May 2021 - Value DeFi Fire Sale - $11m (Global)
"Before rebranding, the DeFi space knew Value DeFi as YFValue (YFV). The project was inspired by the Yearn Finance protocol, a platform designed exclusively to cater to yield farmers."
"Value DeFi is a compilation of products and services for the decentralized finance sector that brings innovation and fairness to the community. This project’s main goals are to increase accessibility to yield farming, provide on-chain governance voting, reward stakeholders with flexible yield strategies, and protect user funds through insurance treasuries." "The Value DeFi suite contains five unique products and services."
"[T]he AMM called vSwap from @value_defi is in trouble." "vSwap is an automated market maker product created by Value DeFi that utilizes smart routing to provide the best rates possible for token swaps. Traders can swap tokens while experiencing low slippage rates and minimal price impact no matter what size they are trading."
"The attacker fisrtly swap 0.05 WBNB for vBSWAP token. [T]he attacker make a flashloan, so vSwap contract will transfer the vBSWAP token and WBNB to the attacker. Before completing the entire exchange process and updating the amount of tokens in the pool, different algorithms will be selected according to whether the tokenWeight0 parameter of the pool is 50 to check whether the amount of tokens in the pool meets expectations. Since the tokenWeight0 parameter of the vSwap contract is set to 70, the second algorithm will be used to check the amount of tokens in the pool. The key point of the vulnerability is that when the second algorithm is used for inspection, the inspection can be passed through specially constructed data."
"The second algorithm is checked by calling the ensureConstantValue function of the formula contract and passing in the amount of tokens cached in the pool and the amount of real-time tokens. After specific analysis and debugging of this algorithm, we can find that when using WBNB to exchange the smallest unit (ie 0.000000000000000001) vBSWAP, a huge fluctuation range is allowed between the WBNB value cached in the pool and the real-time value. This algorithm check within this range will pass. Therefore, the attacker can transfer to WBNB to exchange the smallest unit of vBSWAP tokens, and at the same time lend a large amount of WBNB tokens in the pool through flash loan."
"Due to algorithm problems, they can still pass vSwap check without repaying the flash loan. The attacker only needs to repeat this process continuously in all vSwap pools to steal the liquidity in the pool and complete the profit."
"About $11M was stolen today from non 50/50 pools, in addition to $6M already lost this week as a result of contract reinitialization."
"Value DeFi is a trainwreck." "Six months ago they lost $7M. Three days ago they lost $10M." "Now they’ve lost another $11M."
"The incident was due to the improper use of a complex exponentiation power() function behind the calculation and enforcement of the weighted constant product invariant."
"The very first part of our compensation is live. Please refresh the website to claim your missing tokens."
"Value DeFi is a prime example of how developers can survive in the blockchain industry even if they face several challenges and hardships throughout the production process. Despite the fact that it is not yet a serious competitor, it is still worth observing the project’s growth over the past year and its potential future."
"[T]he native token of Value DeFi has recovered somewhat since the latest exploit. However, Nansen shows us that the DEX volume has been decreasing consistently."
Further Analysis
ValueDeFi had previous issues in August 2020, November 2020, and again 2 days prior.
They haven't yet proposed compensation for this latest attack.
How Could This Have Been Prevented?
Decentralized finance is extremely complicated, and these smart contracts function as immutable hot wallets. The only secure storage of funds is in an offline multi-signature wallet.
More Cryptocurrency Exchange Hacks/Scams/Frauds
Rari Capital Hack > > < < Tanabata Finance/Taba Finance Exit Scam
Sources/Further Reading
Value.Defi Hacked For $15 million. Discussion, Funds Located & Psychological Advice For Recovery - YouTube (May 16)
$22 Million Was Stolen From Three Defi Platforms Last Weekend - The Defiant - DeFi News (May 23)
Rekt - Value DeFi - REKT 3 (May 23)
@value_defi Twitter (May 23)
Rebranding And Expansion (May 23)
What Is Value DeFi? (May 24)
Rekt - Leaderboard (May 24)
Slowmist Value Defi Vswap Module Hack Analysis (May 24)
Four Hacks, one week (Jun 19)
SlowMist Hacked - SlowMist Zone (May 18)
blocksec-incidents/2021.md at main · openblocksec/blocksec-incidents · GitHub (Aug 11)
Valuedefi Incident Incorrect Weighted Constant Product Invariant Calculation (Jul 3)
@FrankResearcher Twitter (May 23)
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