Security remains a top issue in the crypto space. While the market has made massive improvements in this regard, it is looking more and more like hackers are adapting and finding new ways to take advantage of exploits.
In what could be the biggest hack for the crypto space to date, the Axie Infinity network confirmed late last month that it lost hundreds of millions in a massive security breach.
Breaking The Bridge
According to an official announcement on the Axie Infinity Discord page, the platform’s developers confirmed that they had halted the platform’s Ronin Bridge and Katana decentralized exchange (DEX) after both platforms suffered a massive exploit. The security breach saw hackers make away with 25.5 million USDC tokens as well as 173,600 ETH - worth a combined $612 million at the time the hack was recorded.
A further statement from the developers showed that they are working with forensic crypto experts, law enforcement agencies, and investors on how to recover the funds and compensate victims.
The Ronin Bridge is a connective feature that makes it possible for users to move funds between the Ronin network and the Ethereum blockchain. As the tool’s developers explained, the hackers had used private key details to make fake withdrawals from the network. Armed with these private keys, they managed to drain almost all of the funds in the Bridge in just two transactions.
Interestingly, the hack was confirmed to have happened on March 23. But, it was only discovered almost a week later after a user had tried to make a $5,000 withdrawal in ETH.
The Ronin chain comes with nine validator nodes. Of these nine, at least five are required if a withdrawal or a deposit is to be confirmed. Thus, the hacker managed to control more than five private keys - which included four Ronin validators and a third-party validator controlled by the Axie Infinity Decentralized Autonomous Organization (Axie DAO)
While the hack was devastating across all boards, Axie appears to be managing things well. It also helped that the platform’s AX token continued to record gains following the news of the hack.
One would expect that such a terrible piece of news would tank the AXS price, but that didn’t happen. In fact, AXS recorded gains in the 24 hours after the announcement. If anything, it showed that the Axie community remained strong behind this project and would not budge.
Security As An Issue Once Again
Despite the strong support from the Axie community, this hack shows just how important security remains as a stipulation in the crypto space. Over the past few years, there have been massive improvements in crypto security infrastructure. The days when we would see multiple high-profile hacks in the space appear to be gone.
However, there is always one or two hacks per year that still manage to shock investors. 2021 was a relatively quiet year for hackers by their standards. Still, the market still witnessed the massive $610 million hack of Poly Network - a decentralized finance (DeFi) protocol that aimed to connect multiple blockchain protocols together.
Handling multi-chain infrastructure can be taxing. You have to receive funds from different blockchains and distribute them to their destinations. Poly Network held an incredible amount of funds, and it was a perfect victim.
When the hackers were done with the platform, over $610 million had been siphoned - including $264 million from its Ethereum wallet, $250 million from Binance Smart Chain wallets, and about $85 million from wallets on the Polygon blockchain.
Interestingly, the hackers eventually returned about $260 million in the stolen funds after Poly Network’s developers reached out to them. The crypto industry also banded together to help make it more difficult for the hacker to move their ill-gotten gains. Regardless, this is just a show of how important it is for the crypto market to get things right from a security standpoint.
None of this is to say that the traditional market doesn’t witness hacks as well. In fact, traditional tech platforms remain some of the easiest to be hacked. However, one of the primary premises of crypto was security. When cryptocurrencies became mainstream, they promised a way for people to securely and seamlessly transfer and hold value. If we’re seeing hacks of this magnitude, then the chances of crypto becoming truly global will continue to look bleak at best.