Bessie Liu

The spectrum of decentralization has been a hot topic following a <a href="https://blockworks.co/news/jump-crypto-wormhole-hack-recovery">counter-exploit</a> recently executed by Jump Crypto on the Wormhole hacker who stole 120,000 ETH — around $325 million — in February last year.



After receiving an <a href="https://blog.oasis.app/statement-regarding-the-transactions-from-the-oasis-multisig-on-21st-feb-2023/" target="_blank" rel="noreferrer noopener">order</a> from the High Court of England, Oasis — a privately owned app deployed on top of decentralized finance (DeFi) protocol MakerDAO — carried out a counterattack by adding an “authorized third party” to its multisig. The third party — believed to be Jump — then used it to upgrade Oasis’ proxy contract, ultimately seizing the funds.



Many industry participants raised concerns about this move as an indication of the centralization of DeFi, and whether these upgradable contracts should be used at all.



<h2>Wait, what’s a proxy contract?</h2>



In an interview with Blockworks, Joe Coll, a venture investor at Framework Ventures, said that proxy contracts provide upgradability to a protocol’s set of smart contracts.



“When contracts are immutable — when they&#8217;re non-upgradable, it requires the entirety of the network to fork out the code,” Coll said.



<a href="https://blockworks.co/tag/uniswap" target="_blank" rel="noreferrer noopener">Uniswap</a> is one example of this type of protocol. That’s why Uniswap, over several years, deployed discrete versions of its market-leading decentralized exchange, the most recent being “Uniswap V3.” Previous versions are still operating — just as they always have been since their original deployment — and will continue to do so as long as the Ethereum network is producing blocks.



Had Uniswap instead used proxy contracts, it could instead have retired the older versions.



“When a user sends a transaction through a proxy contract, it will point it to another contract that contains the core logic, almost like a router,” Coll said.



Proxy contracts can be controlled in multiple different ways: It could be upgraded by a single private key, it could also be upgraded through on-chain votes where an entire community would have to use tokens to vote before any changes were made to the contract, or it could be controlled by a multisig, he said.



A multisig — short for multi-signature — is a cryptocurrency wallet with two or more key holders.&nbsp;



In the case of the counter-exploit, the proxy contract was controlled by a 4 of 12 Oasis multisig — a known group of individuals who maintained multiple private keys that collectively enable transaction authorization.



“The nuance here is that a few days before all of this happened, what they described as a white hack group came to [Oasis] and identified a previously ‘vulnerability’ within this multisig proxy contract,” Coll said. “And once that was realized by them, and apparently realized by the court as well, the opportunity for unilateral action by this multisig was actually possible, and that’s what the court appears to have enforced.”



<h2>Does this mark the end of decentralization?</h2>



The short answer to this question is no, though lessons can be learned from this counter-exploit.



“Multisigs exist because [protocols] want to do something fast, and just because it has upgradability doesn’t mean they can do everything,” Coll said.&nbsp;



In this particular situation, Coll notes that it was a “really nuanced combination with a vulnerability that was unknown in the middle of it.”



“Multisigs can be very legitimate and they can maintain decentralization if they’re implemented in the right way,” Coll said.



This sentiment is shared by <a href="https://www.blockworksresearch.com/">Blockworks Research</a> analyst <a href="https://www.blockworksresearch.com/research?author=daniel">Dan Smith</a>, who noted that this particular exploit was a unique situation.&nbsp;&nbsp;&nbsp;



“The real issue here is the use of proxies AND a centralized multisig. It&#8217;s the combination of both things. Proxies play an important role in DeFi and aren&#8217;t going anywhere anytime soon,” Smith said.



As proxy contracts are upgraded by their owners, a centralized multisig owner can remove this one aspect of decentralization.



“The UK gov forced Oasis — a private company [headquartered] in [the] UK — to let this counter-exploit happen,” Smith said. “People are not immune to regulation just because they build on blockchain rails.”



Code, on the other hand, when deployed in an immutable fashion, is much more resistant to interference, whether justified or not.



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Wormhole Counter-exploit Forces Scrutiny of Multisigs in DeFi

Community governance that oversees decentralized exchange Uniswap has voted in favor of deploying on Binance-backed BNB Chain via cross-chain bridge Wormhole.



A total of 500 addresses participated in the vote, casting a total of 84.8 million votes. Overall, 65.89% of votes favored the proposal and 33.57% voted against, only 0.53% chose to abstain.



This particular proposal drew attention after prominent venture capital firm a16z <a href="https://blockworks.co/news/a16z-delegated-to-group-that-opposed-its-vote-on-uniswap-for-bnb-chain">used 15 million UNI tokens</a> to vote against the proposal.



Another group that voted against the proposal was Variant Fund — an <a href="https://variant.fund/portfolio/" target="_blank" rel="noreferrer noopener">investor</a> in other blockchain networks including Polygon, Aztec Network, Scroll and Aptos. 



Because those who hold more governance tokens tend to have greater voting power, community members <a href="https://twitter.com/ChrisBlec/status/1622201701921964035" target="_blank" rel="noreferrer noopener">raised concerns</a> about how much influence venture capitalists have over decentralized protocols.



A16z roughly holds <a href="https://blockworks.co/news/a16z-delegated-to-group-that-opposed-its-vote-on-uniswap-for-bnb-chain">64 million UNI tokens</a>, with a majority of the tokens delegated to third-party participants.&nbsp;



Despite this, not all a16z delegates voted against the proposal. <a href="https://www.michiganblockchain.org/" target="_blank" rel="noreferrer noopener">Blockchain at Michigan</a>, for example, used 3.5 million UNI tokens to vote in favor of the proposal.



<a href="https://www.blockworksresearch.com/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> analyst <a href="https://twitter.com/MattFiebach" target="_blank" rel="noreferrer noopener">Matt Fiebach</a> believes that this is a positive sign for decentralization in protocols.



“The vote&#8217;s result against a16z shines a positive light on the VC&#8217;s decision to delegate tokens out to unbiased parties and highlights the benefits of decentralized governance,” Fiebach said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Thank you to everyone who voted on the Uniswap V3 BNB Chain Deployment — we’re honored by the trust the community has put in us and look forward to helping <a href="https://twitter.com/Uniswap?ref_src=twsrc%5Etfw">@Uniswap</a> go xChain to <a href="https://twitter.com/BNBCHAIN?ref_src=twsrc%5Etfw">@BNBCHAIN</a> with Wormhole.<a href="https://t.co/RU46DVC6EC">https://t.co/RU46DVC6EC</a>&mdash; Wormhole🌪 (@wormholecrypto) <a href="https://twitter.com/wormholecrypto/status/1624051141033033729?ref_src=twsrc%5Etfw">February 10, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h2>Deploying everywhere, for now</h2>



BNB Chain is not the only blockchain network that Uniswap is looking to deploy on. Governance proposals and discussions about deploying the decentralized exchange (DEX) onto <a href="https://gov.uniswap.org/t/governance-proposal-deploy-uniswap-v3-on-moonbeam/16759" target="_blank" rel="noreferrer noopener">Moonbeam</a>, <a href="https://gov.uniswap.org/t/deploy-uniswap-v3-to-boba-network/18018" target="_blank" rel="noreferrer noopener">Boba Network</a> and <a href="https://gov.uniswap.org/t/rfc-deploy-uniswap-v3-on-starknet/19938" target="_blank" rel="noreferrer noopener">StarkNet</a> are all in motion.



This is likely because Uniswap v3’s business source license (BSL) will <a href="https://blockworks.co/news/uniswap-multichain-future">expire in the coming months</a>, Getty Hill, the co-founder of the delegate, GFX Labs, previously told Blockworks.



To prevent other protocols from copying Uniswap v3’s code, Hill believes that Uniswap governance may have adopted a “deploy everywhere” strategy.



“It’s much harder to fork the protocol if there’s already a Uniswap v3 deployment there,” Hill said.



Deploying on other chains has been quite successful for Uniswap thus far. Three months after launching on Polygon, the DEX captured almost 50% of its market share.&nbsp;



Now that the vote has passed to deploy on the BNB chain, Fiebach notes that Uniswap will likely gain an even larger portion of the existing DEX market.



“It will be interesting to see how the proprietary UNI v3 concentrated liquidity model becoming open source on Apr. 1 impacts their dominance,” Fiebach said.



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Uniswap Coming to BNB Chain? Governance Says Yes

Casey Wagner

Topping off an already tumultuous year for cryptocurrency prices and company blowups, 2022 was a record year for crypto hacks.&nbsp;



From January 2022 to November 2022, hackers made off with $4.3 billion of cryptocurrency, up 37% from the same period in 2021, according to <a href="https://www.privacyaffairs.com/cryptocurrency-scams-2022/" target="_blank" rel="noreferrer noopener">data</a> from cybersecurity firm Privacy Affairs. Analysts at Solidus Labs estimate bad actors are launching up to 15 crypto-related scams per hour. 



We’ve rounded up the top hacks of the year — so far. 



<h3>Axie Infinity’s Ronin Network — $625 million </h3>



Coming in at the biggest breach of the year, hackers made off with more than $600 million from <a href="https://blockworks.co/tag/ronin" target="_blank" rel="noreferrer noopener">Ronin Network</a>, an Ethereum-linked sidechain used for blockchain game Axie Infinity in <a href="https://blockworks.co/news/sky-mavis-ronin-network-bridge-exploited-for-over-600m" target="_blank" rel="noreferrer noopener">March</a>. Exploiters, the network said, used hacked private keys to forge withdrawals on March 23. The breach wasn’t discovered until almost a week later, when a user was unable to withdraw 5,000 ETH.



Later, Sky Mavis, the company that built the bridge, <a href="https://twitter.com/trungfinity/status/1511416163313414147" target="_blank" rel="noreferrer noopener">acknowledged</a> that it may have sacrificed security for speed when developing the bridge. Sky Mavis then announced a $150 million raise, led by Binance, to reimburse affected users. Other contributors to the round included Paradigm, Animoca Brands, Dialectic, Accel and Andreesen Horowitz.



<h3>Wormhole Bridge — $320 million </h3>



In February, hackers targeted <a href="https://blockworks.co/tag/wormhole" target="_blank" rel="noreferrer noopener">Wormhole</a>, one of the largest cross-chain bridges between Solana and other blockchains. The bad actors exploited a vulnerability in Wormhole’s validation system, allowing them to make off with fraudulently generated wrapped ether. 



Hackers then used the chain to convert the wrapped ether into ether. Wormhole <a href="https://blockworks.co/news/wormhole-parent-commits-320m-ether-to-replace-massive-defi-hack-losses" target="_blank" rel="noreferrer noopener">parent company</a> Jump Crypto later replaced all 120,000 ether the bridge lost. 



<h3>Nomad Bridge — $190 million </h3>



In August, DeFi bridge <a href="https://blockworks.co/tag/nomad" target="_blank" rel="noreferrer noopener">Nomad</a> lost $190 million in a hack that involved 960 transactions and 1,175 individual withdrawals. Users were able to exploit a bug in the protocol that allowed them to withdraw more than they had deposited. 



It is thought that once news of the bug spread, users rushed to exploit it themselves, resulting in a free-for-all involving onlookers rushing to submit illicit transactions, quickly draining the token bridge of all user funds kept inside its associated smart contract.



White hat hackers later returned at least $32 million to a recovery wallet address, <a href="https://blockworks.co/news/nomad-recovers-nearly-20m-of-stolen-190m" target="_blank" rel="noreferrer noopener">Nomad said</a>. The wallet was set up in association with custodian bank, Anchorage Digital. 



<h3>Beanstalk Farms — $182 million </h3>



Ethereum-based stablecoin protocol <a href="https://blockworks.co/tag/beanstalk" target="_blank" rel="noreferrer noopener">Beanstalk</a> lost $182 million in April when a hacker used a flash loan to buy a majority position in STALK, the protocol’s native governance token. The hacker then proposed a massive transfer of funds and approved it using their own majority vote. 



Nearly four months after the breach, the algorithmic stablecoin protocol relaunched. Beanstalk Farms <a href="https://blockworks.co/news/algo-stablecoin-protocol-beanstalk-relaunches-following-180m-hack" target="_blank" rel="noreferrer noopener">said it “unpaused” its services</a> on the one-year anniversary of its original August 2021 launch.



<h3>Wintermute — $160 million </h3>



In September, Liquidity provider <a href="https://blockworks.co/tag/wintermute" target="_blank" rel="noreferrer noopener">Wintermute</a>, which provides liquidity across most CeFi and DeFi exchanges, said it lost $160 million in a security breach. Wintermute is among the largest crypto liquidity providers, conducting market making services for exchanges including Binance and Coinbase.



There is <a href="https://blockworks.co/news/was-wintermute-160m-hack-an-inside-job" target="_blank" rel="noreferrer noopener">speculation that the hack was an inside job</a>, but no cause or perpetrator has been confirmed.



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Crypto Thieves Made Off With $4.3B in 2022: Top Hacks of the Year

<div id="highlights-block_629fb10800a8f" class="highlights">
 <ul>
 <li>No user funds were lost or stolen before the loophole was discovered</li>
 <li>Up to $200 million worth of Aurora users’ funds could have been hacked if this bug wasn’t fixed</li>
 </ul>
 
</div>



It was almost the next market-moving DeFi hack.&nbsp;



Aurora, an Ethereum Virtual machine built on the NEAR Protocol, recently paid a $6 million reward to a so-called white hat hacker for identifying a key bug. 



The hacker, known as pwning.eth, uncovered in April a critical vulnerability in Aurora’s system, which could have jeopardized up to $200 million of funds. Virtual machines power smart contracts, or transactions executed in code on the blockchain without intermediaries, on Ethereum. Aurora paid the bounty through the Immunefi platform. 



It marks one of the largest-ever known bounty payouts in DeFi (decentralized finance) history. Last month, crypto bridge Wormhole — which connects different blockchains — <a href="https://www.theblockcrypto.com/post/148085/wormhole-announces-10-million-bug-bounty-payout" target="_blank" rel="noreferrer noopener">paid</a> $10 million to an ethical security hacker that also discovered a bug through Immunefi’s platform.



<blockquote class="wp-block-quote">“Such a vulnerability should have been discovered at an earlier stage of the [defense] pipeline and we have already started improving our methods to achieve that in the future,” Frank Braun, Aurora’s head of security, said in a statement Tuesday. </blockquote>



Added Braun: “However this event ultimately proves that our security mechanisms work.”



The bug was initially flagged via Immunefi — crucially, before any funds were stolen. <a href="https://immunefi.com/bounty/aurora/" target="_blank" rel="noreferrer noopener">Aurora&#8217;s bounty program</a> with Immunefi was launched in April 2022, with rewards ranging from $1,000 to $6 million, depending on severity. 



Jonah Michaels, a spokesperson for Immunefi, told Blockworks that at “a time of distrust in the markets, it’s important more than ever for Web3 projects to show that they take security seriously.”



On Immunefi’s platform, security researchers review code and disclose vulnerabilities. Through its programs with DeFi projects, Immunefi said it paid over $40 million in bounties to friendly hackers — claiming to have prevented over $20 billion in potential damages.



Aurora’s goal is to provide application developers the means to operate on Ethereum-compatible platforms under the governance of the decentralized Aurora DAO. Aurora’s scaling solution is currently responsible for $373 million of NEAR’s $786 million in total value locked, <a href="https://defillama.com/chain/Aurora?currency=USD" target="_blank" rel="noreferrer noopener">according to data provider DefiLlama</a>.



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$6M Bounty Paid to White Hat Hacker Likely Averts Sizable DeFi Hack

Sebastian Sinclair

<div id="highlights-block_628d839a80758" class="highlights">
 <ul>
 <li>Injective&#8217;s Wormhole integration enables the ability for greater sophistication of transfers across its network, the company said</li>
 <li>The move will also allow for cross-chain trading across various networks, according to Injective Labs&#8217; CEO Eric Chen</li>
 </ul>
 
</div>



Decentralized blockchain network Injective said Wednesday it has integrated with cross-chain messaging protocol Wormhole in an effort to drive liquidity and boost the accessibility of its platform.



With the addition of Wormhole, Injective is aiming to tap into more than ten additional layer-1 and layer-2 blockchains, including Polygon, Algorand and Solana, by bridging them to its network.



The move is an attempt to transform Injective from an exchange-focused blockchain to a decentralized finance hub. The aim is to provide more use cases for owned digital assets to be utilized beyond their origin chain, Eric Chen, CEO of Injective Labs told Blockworks in an email.



Wormhole is a generic message-passing protocol that connects high-value blockchains allowing applications to leverage the messaging layer to facilitate interoperability between different ecosystems. 



The protocol has not been impervious to nefarious actors seeking to <a href="https://twitter.com/wormholecrypto/status/1489001949881978883?s=20&amp;t=XaNgH_RbKd5dNrdqqTKZWw" target="_blank" rel="noreferrer noopener">exploit</a> it when it became the target of an attack in February.



Still, the area of focus following the integration is to allow applications on other chains to access and compose with the Injective ecosystem as well as enable more sophisticated transfers — such as arbitrary messages, Chen said.



<blockquote class="wp-block-quote">&#8220;This integration will help increase the range of possibilities and functionalities for builders,&#8221; said Chen. &#8220;The first key area of focus is to enable asset transfers from all chains.&#8221;</blockquote>



Apps developed on Injective could open possibilities for cross-chain trading across various networks or offer yields on Solana-based assets, the CEO added.



Injective is a Layer 1 proof-of-stake blockchain geared toward building financial applications. Its ecosystem touts the ability to enable developers to leverage critical DeFi primitives including liquidity, risk, leverage and arbitrage opportunities.



&#8220;This integration opens up the pool of users that can utilize an application,&#8221; Chen said. &#8220;It broadens the audience scope for the developer, which allows a larger market to exist when thinking of a product-market fit.&#8221;



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Injective Integrates Wormhole Bridge in Effort to Enhance Cross-Chain Accessibility

<div id="highlights-block_62605237d88d8" class="highlights">
 <ul>
 <li>Transactions of more than $10 million became the largest segment of DeFi transactions by volume</li>
 <li>Hackers made off with $3.2 billion in cryptocurrency in 2021, according to Chainanalysis</li>
 </ul>
 
</div>



Total value locked in DeFi increased from $601 million at the start of 2020 to $239 billion so far in 2022, a nearly 40,000% rise, according to a new research <a href="https://blog.amberdata.io/defi-and-the-transformation-of-institutional-finance?utm_medium=email&amp;_hsmi=210559080&amp;_hsenc=p2ANqtz--4jBnJwnHdMtyADjUnlFmz3EWc60XJyaMGdl1NYqYtV3SX4KRwULMEajGaUK9DCcdv2vEuHTmoCtizJjEAq1tmaLmMOQ&amp;utm_content=210559080&amp;utm_source=hs_email" target="_blank" rel="noreferrer noopener">report</a>.



The report’s author, blockchain data provider Amberdata, said the massive rise is “still in the early stages,” adding that total value locked (TVL) should “increase dramatically” in the next few years as institutions enter the market.



Large institutional transactions, which blockchain analytics company Chainalysis defines as above $10 million, became the biggest segment of DeFi (decentralized finance) trades by volume beginning in the fourth quarter of 2020 and grew to over 60% of transaction volume by the second quarter of 2021, according to the company.&nbsp;



Even as more capital floods DeFi protocols, the industry remains vulnerable to hacks. In 2021, hackers made off with $3.2 billion in cryptocurrency, according to Chainanalysis <a href="https://blog.chainalysis.com/reports/2022-defi-hacks/" target="_blank" rel="noreferrer noopener">data</a>.



Ronin Network, an Ethereum-linked sidechain used for blockchain gaming group Axie Infinity, was <a href="https://cms.blockworks.co/sky-mavis-ronin-network-bridge-exploited-for-over-600m/" target="_blank" rel="noreferrer noopener">breached</a> in late March for roughly $600 million, or <a href="https://etherscan.io/address/0x098b716b8aaf21512996dc57eb0615e2383e2f96" target="_blank" rel="noreferrer noopener">173,600 ether</a>, as well as $25.5 million USDC. <a href="https://cms.blockworks.co/treasury-sanctions-north-korean-hacker-group-confirms-ties-to-625m-hack/" target="_blank" rel="noreferrer noopener">Federal investigators</a> later confirmed that North Korea-based hacker Lazarus Group led the hack.



DeFi protocol <a href="https://cms.blockworks.co/wormhole-parent-commits-320m-ether-to-replace-massive-defi-hack-losses/" target="_blank" rel="noreferrer noopener">Wormhole</a> suffered a $326 million hack in February — then the second-largest such incident to date. The largest hack in DeFi, and all of crypto, is still the August 2021 $600 million Poly Network hack.



The crime was attributed to a figure that went by the name “Mr. White Hat,” who, <a href="https://cms.blockworks.co/poly-network-offers-chief-security-officer-role-to-hacker-that-stole-600m/" target="_blank" rel="noreferrer noopener">in an interesting turn of events</a>, was later offered a security position at the interoperability protocol.



Despite mounting security concerns, researchers at Amberdata insist use cases for DeFi technology are only just emerging, particularly when it comes to financial infrastructure and efficiency.&nbsp;



DeFi can offer new solutions for data storage, meaning financial services companies could save resources on infrastructure development, the Amberdata report said.&nbsp;



“For example, a retail bank that maintains ATMs and branches needs to maintain data connections between those endpoints, its corporate offices, and the data center(s) where that data is stored,” researchers wrote. “This bank could leverage a DeFi solution on a private blockchain that reduces data center needs only to what is necessary to maintain blockchain nodes.”



DeFi-enabled smart contracts can also speed settlement times and support complex financial transactions, researchers added.



“In 2021, the global financial services market was estimated to be worth more than $23.3 trillion, meaning that at present, DeFi accounts for about 1% of the total,” the report said. “An increase to just 5% would see over a trillion dollars flow into the space.”



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Large Institutional Transactions Push Total Value Locked in DeFi to $239B

In the latest episode of &#8220;<a href="https://youtu.be/1mssuEPiSME" target="_blank" rel="noreferrer noopener">Empire</a>,&#8221; Weekly Roundup, Blockworks&#8217; Jason Yanowitz and Santiago Roel Santos cover the Ethereum hack on Wormhole and MakerDAO&#8217;s governance proposal. They also dig into why everyone is misunderstanding the importance of DAOs (hint: it has nothing to do with governance).



Jason and Santiago also talk about:



<ul><li>ConsenSys&#8217; MyCrypto acquisition</li><li>Metaverse&#8217;s freedom of expression</li><li>Pushback to MakerDAO&#8217;s governance proposal</li><li>and so much more</li></ul>



Check out what they had to say in the video below. 👇



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<iframe loading="lazy" title="Consequences Of DeFi’s $320M Hack | Weekly Roundup" width="1024" height="576" src="https://www.youtube.com/embed/1mssuEPiSME?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
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<h3>About the show</h3>



&#8220;Empire&#8221; is a twice-a-week show. On Thursdays, Jason interviews crypto industry movers and shakers to talk about their struggles, bold moves and tough decisions. Friday&#8217;s weekly roundup episodes feature <meta charset="utf-8">co-host Santiago Roel Santos and cover the top news from the past week.



For any NPR or Guy Raz fans out there, you can think of &#8220;Empire&#8221; as a &#8220;How I Built This&#8221; for the bitcoin and crypto industry.



Subscribe to &#8220;Empire&#8221; today on&nbsp;<a href="https://podcasts.apple.com/us/podcast/empire/id1554930038" target="_blank" rel="noreferrer noopener">Apple</a>&nbsp;or&nbsp;<a href="https://open.spotify.com/show/4UTePv1CR3APdKOiosR3Iq" target="_blank" rel="noreferrer noopener">Spotify</a>. Watch episodes on&nbsp;<a href="https://www.youtube.com/playlist?list=PLvER9nHSRN3wPkrDGTT5_8VC4Hjcq0f9U" target="_blank" rel="noreferrer noopener">YouTube</a>.



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Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a target="_blank" href="https://cms.blockworks.co/newsletter/?source=end" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.



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Podcast: Consequences Of DeFi’s $320M Hack | Weekly Roundup

Jacquelyn Melinek

<div id="highlights-block_61fc372ed49f7" class="highlights">
 <ul>
 <li>The total value locked on Solana fell about 12.3% from $8.55 billion Wednesday to $7.5 billion Thursday, according to DeFiLlama data</li>
 <li>The ether was exploited from a smart contract, not “taken” from an Ethereum address, a Wormhole admin said</li>
 </ul>
 
</div>



Wormhole’s parent company has dug the DeFi protocol out of a $320 million hole.



Jump Crypto replaced all 120,000 ether Wormhole lost Wednesday in the <a href="https://defiyield.app/rekt-database" target="_blank" rel="noreferrer noopener">second biggest decentralized finance hack</a> to date, a spokesperson told Blockworks. The decision by Jump Crypto, which is owned by Jump Trading, to replenish the missing funds may have headed off long-term damage to the Solana blockchain.



The total value locked (TVL) on Solana fell about 12.3% from $8.55 billion Wednesday to $7.5 billion Thursday, according to DeFi Llama <a href="https://defillama.com/chain/Solana?currency=USD" target="_blank" rel="noreferrer noopener">data</a>.



“[Jump Crypto] believes in a multichain future and that [Wormhole] is essential infrastructure,” the company wrote in a tweet. “That’s why we replaced 120k ETH to make community members whole and support Wormhole now as it continues to develop.”



Wormhole is one of the largest cross-chain bridges between Solana and other blockchains. It has over $1 billion in TVL and supports six blockchains: Terra, Solana, Ethereum, Binance Smart Chain, Avalanche and Polygon.



Its portal shut down for a few hours Wednesday as the company worked to <a href="https://twitter.com/wormholecrypto/status/1489233259808571401?s=20&amp;t=jTmhWwG1o9ca_pb3pgzw4g" target="_blank" rel="noreferrer noopener">patch the network vulnerability</a>.



By 8:30 am ET Thursday, the portal’s token bridge was again operational.&nbsp;



“All wETH has been restored,” a Wormhole admin, who goes by the username d231d, wrote in its Telegram group Wednesday.



The hacker’s Ethereum address hasn&#8217;t been used since transferring the tokens to their wallet,&nbsp;according to Etherscan <a href="https://etherscan.io/address/0x629e7da20197a5429d30da36e77d06cdf796b71a#internaltx" target="_blank" rel="noreferrer noopener">data</a>.



The ether was exploited from a smart contract, not “taken” from an Ethereum address, the admin said. The exploit took place over three different transactions, Blockworks <a href="https://cms.blockworks.co/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether/" target="_blank" rel="noreferrer noopener">reported</a>.



When a user transfers assets between blockchains, the bridge steps in to lock the transaction and mint a wrapped version, such as wrapped ether (wETH), to its final chain.



Etherscan added a disclaimer to the address’ page: “There have been reports that this address is involved in the Wormhole network <a href="https://twitter.com/wormholecrypto/status/1489001949881978883" target="_blank" rel="noreferrer noopener">exploit</a>. Please proceed with caution.”



The protocol said it plans to release an in-depth report with further details “ASAP.”



Jump Crypto President Kanav Kariya said in a tweet that Wormhole would come out &#8220;stronger than ever.&#8221; 



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Jump put up 120k of it’s own ETH because we believe in Wormhole and want to support it in this stage of its development. And we&#39;re going to come out stronger than ever Detailed incident report from Wormhole to come soon&mdash; Kanav Kariya 🦬 (@KariyaKanav) <a href="https://twitter.com/KariyaKanav/status/1489312871456649228?ref_src=twsrc%5Etfw">February 3, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Wormhole said an ether contract was filled and will ensure that all wETH is backed in a 1-to-1 ratio to ensure exchangeability with the native ether.



Wormhole sent an on-chain <a href="https://www.notifi.xyz/messages/1497" target="_blank" rel="noreferrer noopener">message</a> to the hacker after the exploit, offering a reward for the return of the tokens.



It is still unclear whether the exploiter responded. Neither the admin or protocol immediately returned a request for comment.



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Wormhole Parent Commits $320M Ether to Replace Massive DeFi Hack Losses

<div id="highlights-block_61fb04f91a065" class="highlights">
 <ul>
 <li>“As far as we can tell now, only wETH has been affected, no other tokens,” a Wormhole admin wrote on Telegram</li>
 <li>The protocol offered the hacker a bounty of $10 million for details on the exploit and return of the stolen wrapped ether</li>
 </ul>
 
</div>



Wormhole, one of the largest bridges between Solana and other blockchains, has been hacked for about $320 million, or 120,000 ether — making it the second largest <a href="https://defiyield.app/rekt-database">DeFi hack</a> to date.&nbsp;



The interoperability protocol confirmed the exploit in a <a href="https://twitter.com/wormholecrypto/status/1489001949881978883">tweet</a> Wednesday evening.



“ETH will be added over the next hours to ensure wETH is backed 1:1,” the protocol wrote. “More details to come shortly. We are working to get the network back up quickly.”



Wormhole <a href="https://twitter.com/wormholecrypto/status/1488976115750383626" target="_blank" rel="noreferrer noopener">said earlier</a> that the network was down for maintenance. Its website stated “Portal is Temporarily Unavailable” at the time of publication.



The exploit comes after hackers <a href="https://cms.blockworks.co/defi-protocol-qubit-finance-loses-80m-in-hack/" target="_blank" rel="noreferrer noopener">made off with $80 million</a> from decentralized finance protocol Qubit Finance last week.&nbsp;



Wormhole is a protocol that allows users to bridge assets across blockchains. It has over $1 billion in total value locked and supports six blockchains: Terra, Solana, Ethereum, Binance Smart Chain, Avalanche and Polygon.&nbsp;



When a user transfers assets from one blockchain to another, the bridge steps in to lock the transaction and mint a wrapped version, such as <a href="https://cms.blockworks.co/wrapped-crypto-tokens-and-why-theyre-critical-to-markets/">wrapped ether</a> (wETh), to its final chain.



“As far as we can tell now, only wETH has been affected, no other tokens,” a Wormhole admin, who goes by the username d231d, wrote in its Telegram group. The admin added that the portal bridge is down and asked members not to initiate further transactions.



Some users reported stuck transactions, but the admin said that “as soon as the network is back up, you will be able to redeem the tokens you sent into the bridge.”


<div class="wp-block-image">
<figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="137" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png" alt="" class="wp-image-16646" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Wormhole-Exploited_Img0-1024x137.png?w=1079 1079w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>The hacker transferred the stolen tokens from Wormhole to their wallet.</figcaption></figure></div>


While it’s not known how the hacker exploited the network, it took place over three different transactions around 2:00 pm EST on Wednesday, according to Etherscan <a href="https://etherscan.io/address/0x629e7da20197a5429d30da36e77d06cdf796b71a#internaltx" target="_blank" rel="noreferrer noopener">data</a>.&nbsp;



Wormhole sent an on-chain <a href="https://www.notifi.xyz/messages/1497" target="_blank" rel="noreferrer noopener">message</a> to the hacker about an hour after the exploit, offering a reward for the return of the tokens.&nbsp;



“We noticed you were able to exploit the Solana VAA verification and mint tokens,” the message said. “We’d like to offer you a whitehat agreement, and present you a bug bounty of $10 million for exploit details, and returning the wETH you’ve minted.”



It’s not clear whether the exploiter responded to Wormhole. The protocol was not immediately available for comment.



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Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
Can&#8217;t wait? Get our news the fastest way possible.&nbsp;<a href="https://t.me/blockworks_news" target="_blank" rel="noreferrer noopener">Join us on Telegram</a> and follow us on <a href="https://news.google.com/publications/CAAqBwgKMPyTxgswn6_dAw" target="_blank" rel="noreferrer noopener">Google News</a>.
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