Yearn Finance Exploit Points to Dangers of Old Smart Contracts

Damage from the $11.6 million exploit appears contained to original version of DeFi protocol’s permissionless vaults

article-image

Source: Shutterstock / Ivan Babydov, modified by Blockworks

share

DeFi stalwart Yearn Finance was the target of a dizzyingly complex attack early Thursday that resulted in a roughly $11.6 million stablecoin haul for the culprit. 

But the root cause dates back over three years, to a version of the savings protocol that has long since been officially abandoned.

At least $8 million in stablecoins remains in the hacker’s control, most of which has been swapped to DAI, with the remaining millions exchanged for ether (ETH) and partially passed to crypto mixer Tornado Cash in an effort to obfuscate its origin.

Yearn’s YFI governance token initially fell by roughly 5% on the news, but remains up nearly 80% year-to-date, data from CoinGecko shows.

Yearn’s official Twitter confirmed the exploit, noting that the affected vault is “an immutable contract predating YFI, [that] was deprecated in 2020.”

The attacker was able to take advantage of a vulnerability in the deployment of one of the early Yearn vaults involving tether (USDT) deposits, which receive a Yearn-equivalent token yUSDT, according to security researchers Otter Sec, samczsun and Peckshield.

Using starting capital of just 10,000 USDT, the perpetrator was able to mint over 1.2 quadrillion yUSDT and then swap those for other stablecoins via Curve Finance to extract a total of $11.6 million.

Loading Tweet..

The attack vector is linked to an apparent oversight from February 2020, when the yUSDT token contract was deployed with a bug. 

Loading Tweet..

The detail identified by Samczsun regarding an apparent “misconfiguration” is notable, according to Ernesto Garcia, Smart Contract Engineer at OpenZeppelin.

“It seems weird to me that the Fulcrum iUSDC address is hard-coded,” Garcia told Blockworks. “If the contract went through a review, it was either an oversight (everyone assuming the correct address), or might’ve been changed before deployment as some tweets out there suggest.”

Garcia suggested that bytecode verification against the audited code from the time would determine whether there was any deliberate tampering.

Aside from the age of the bug, the execution of this attack required multiple steps, three different DeFi protocols, including Aave and a flash loan.

Diagram of the flow of funds; Source: Peckshield

Aave itself is unaffected, meaning its users are not at risk, according to Peckshield, nor are users of more recent Yearn vaults.

The unknown attacker converted $1.2 million USDT to 621 ETH, and used exploited TUSD stablecoin as collateral in Aave V2 to borrow a further 320 ETH ($640,000). Much of that ether has been deposited into the Tornado Cash 100 ETH anonymity set, blockchain records show.

A separate wallet linked to the first received over 4.7 million DAI and 2.5 million USDC, with the latter swapped to DAI, where it remains as of 9:30 am ET.

Hackers prefer DAI and ETH over USDC and USDT because the centralized stablecoins from Circle and Tether are more easily frozen, preventing further transfer.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

hivemapper.jpeg

Research

We believe crypto market participants overlook Hivemapper’s fundamental potential due to a poor understanding of both the niche map data market and Hivemapper’s positioning relative to incumbents. Hivemapper’s token model catalyzes both a cost and product advantage via unmatched map freshness and near real-time accuracy, which is its wedge into a market characterized by stale data and high data collection costs. Its current and potential future product suite may represent one of the strongest possibilities for PMF in crypto today.

article-image

👨‍⚖️ SBF’s courtroom sequel: Plus, Coinbase’s legal loss was DeFi’s gain

article-image

Public mining companies have been acquiring sites, refreshing machine fleets and diversifying business models in preparation for the event

article-image

Exploit shows centralization can sometimes be an asset

article-image

The Fidelity Ethereum Fund, like other proposed ETH ETFs, seeks to stake a portion of its assets, according to the firm’s Wednesday registration statement

article-image

The DAO first voted on enabling SAFE transfers over a year ago