Cybersafsety Connections April 4, 2022 Vol#61

  • Blockchain hack of the Roning Network connected to online non-fungible game Axie Infinity.
  • Issues unfolding is the security concern around decentralized finance protocols.
  • High Alert on centralized exchanges and tracking by Chain analysis.
  • Solving for future security with a more secure protocol.

Image from fool.com

Last week, hackers stole $625M in USDC & ETH from a blockchain network @Ronin_Network that is a bridge connected to the popular online non-fungible video game Axie Infinity. The Ronin Network published a blog post last week explaining that the hack happened as a result of attackers using hacked private keys to fake withdrawals taking 173,600 ether tokens and 25.5 million USD Coins. This was reported to be the second biggest crypto hack of all time. 

This breach was discovered when a user reported that they were unable to withdraw 5,000 ETH, worth $17 million, from the network.Second Biggest Crypto Hack.

Security Issue with Defi Protocol

This incident is bringing to light the security concerns around decentralized finance protocols. According to the blockchain analytics firm Chainanalysis, $3.2 billion worth of cryptocurrency was stolen from individuals and services in 2021 which is 6x the amount stolen in 2020.

What has happened is that the hackers sent most of the funds to centralized exchanges that have been put on high alert.It has been reported that Chainalysis is tracking the funds on their behalf.What is yet to be seen is if the hackers will withdraw the funds.

One Chain to Multi-Chain 

There is the belief that the blockchain industry will consist of different networks that will be able to communicate with each other just like Android users can now make facetime calls.

Currently, blockchains like Bitcoin, Ethereum, Solana, Avalanche, and others have a competitive advantage that keeps them profitable and so users have to choose between them. This situation is not thought to be ideal.

The way the communication across the different blockchains happens is on bridges. Bridges take care of the ability of the different blockchains to exchange and make use of information from each other by simply locking the asset that is coming from one chain and supplying an equivalent amount of token to another chain.

Issue with Bridges

The issue with the bridges is that it creates a level of centralization and makes it unsafe and that is being taken advantage of like stealing private keys. This was what happened in the $625 million hacks of the Ronin bridge, a specialized Ethereum compatible network that supports the popular online game Axie Infinity. Ronin blockchain is the bridge that transports tokens between Axie Infinity and Ethereum blockchain.

Back in February, there was an attack on the Wormhole bridge between Solana and the Ethereum network causing a loss of $320 million. This was reimbursed by Wormhole sponsor JumpCrypto.

Solving for Security

According to Forbes Investors are backing LayerZero Labs which is developing protocols to connect decentralized applications across various blockchains that would include a bridge token that is more secure than the one used in the $625 million Ronin breach.

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