Zunami Protocol - REKT

NOTE: This article has been edited to remove reference to Ackee Blockchain, who audited an earlier version of the protocol before the attacked MimCurveStakeDAO strategy was added.

The Curve ecosystem can't catch a break…

Yesterday, Zunami Protocol lost $2.1M as the project’s Ether- and USD-pegged stablecoins came under a price manipulation attack.

Although Curve itself was unaffected, the exploiter drained Zunami’s zETH and UZD liquidity pools on Curve, causing the ‘zStables’ to depeg by 85% and 99%, respectively.

Peckshield raised the alarm but, after the recent BlockSec/Curve debacle, was careful not to provoke criticism and opted not to provide transaction hashes or addresses.

Shortly after, Zunami confirmed the exploit:

It appears that zStables have encountered an attack. The collateral remain secure, we delve into the ongoing investigation.

First Conic Finance, then JPEG’D, Alchemix and Curve itself, now Zunami…

Could the Curve Wars be proving even more lucrative for hackers than for protocols?

Credit: Peckshield, BlockSec

Just over an hour after the initial alert, and presumably after confirming no further funds were at risk, Peckshield followed up with more detail:

It is a price manipulation issue, which can be exploited by donation to incorrectly calculate the price as shown in the following figures.

The attacker used flash loans to execute large token swaps (e.g. SDT), causing slippage in the pool which could be used to manipulate LP token prices. The root cause was a flawed price calculation via the totalHoldings function.

BlockSec provided the following step-by-step:

The proceeds (1184 ETH or $2.1M) were quickly deposited into Tornado Cash.

The protocol itself and the UZD and zETH contracts were audited by Hashex.

Attacker’s address: 0x5f4c21c9bb73c8b4a296cc256c0cde324db146df

Exploit tx (zETH): 0x2aec4fdb…

Exploit tx (UZD): 0x0788ba22…

The Sushiswap SDT pool, although used by the hacker during the price manipulation, is safe (despite what a certain relentless bear-poster might like to imply).

Peckshield may have been careful not to include sensitive information in their alert, but others weren’t so cautious.

Following BlockSec’s public announcement of the root cause behind the Vyper bug last month, the backlash prompted a debate about how many security firms apparently chase Twitter clout while potentially aiding hackers.

The discussion, and calls for feedback, appear to have led to tweaked alerting standards which prioritise only the crucial information to alert users who may need to withdraw funds, but without giving away any clues which bad actors may take advantage of.

Another step forwarded is the SEAL 911 hack hotline; the Telegram bot aims to use its list of members is a fast-response for any concerned whitehat looking to alert a potentially vulnerable protocol’s team.

Security teams do important work in DeFi, where exploiters are lurking around every corner.

Not least BlockSec, with their impressive whitehacking record.

But keeping DeFi safe is a constant game of cat-and-mouse, one that can’t always be won.

Who will be next to fall prey?

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dona (ETH / ERC20): 0x3C5c2F4bCeC51a36494682f91Dbc6cA7c63B514C

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