Decentralized finance is one of the best use-cases of smart contracts to date. With new financial tools and services available worldwide, the potential is clear. Many of these projects are brand new and introduce innovative features to keep them competitive. With BadgerDAO recently becoming one of the latest victim to hackers, one of the major issues plaguing the DeFi industry relates to security.
However, with new technology, the prevalence of bugs and exploits is extremely high. Top auditing companies continue to search for these defects, but with millions of dollars at stake, there are many hackers trying equally as hard to find them first.
The latest hack to be announced was with regards to BadgerDAO. Badger was created in September 2020 with a lot of endorsement. Its ethereum based platform was designed to serve a growing need for the use of bitcoin in DeFi applications on blockchain networks.
It had grown in popularity, the products, Digg and Sett Vaults were successful alongside the BADGER token. However, on 2 December it released news that sadly the platform had been exploited, big time.
BadgerDAO wrote on Twitter to explain that someone had found a way to do unapproved withdrawals on its platform. Unlike many DeFi hacks, this one was not related to manipulating token prices or flaws in smart contracts, instead, it was the web service that allowed the flaw.
The hacker utilized the CloudFlare software to inject false API keys into other users' wallets. This allowed the hacker to approve withdrawals. The BadgerDAO platform differs, it utilizes Bitcoin but is built on Ethereum, which means approvals are done via the website and not through actual smart contracts.
BadgerDAO initially reported that $10m had been stolen through this exploit. Later it was confirmed by third parties that the hack was around $115m. One person reportedly lost $50m due to the hackers targeting the largest wallets on the platform.
BadgerDAO is one of the few platforms that are covered under Nexus Mutual’s insurance policy, but only if the user had opted to use it. At this time it is unsure whether Nexus Mutual will cover this issue. It has been reported that only $14m of coverage had previously been purchased.
BadgerDAO’s token BADGER took a massive plummet and is currently down 22%. It has paused all of its smart contracts to stop withdrawals until figures out how to stop the exploit. It will have to work hard to build back trust after this incident.
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