Blockchain startup MonoX Finance said on Wednesday that a hacker stole $31 million by exploiting a bug in software the service uses to draft smart contracts.
The company uses a decentralized finance protocol known as MonoX that lets users trade digital currency tokens without some of the requirements of traditional exchanges. “Project owners can list their tokens without the burden of capital requirements and focus on using funds for building the project instead of providing liquidity,” MonoX company representatives say here. “It works by grouping deposited tokens into a virtual pair with vCASH, to offer a single token pool design.”
An accounting error built into the company’s software let an attacker inflate the price of the MONO token and to then use it to cash out all the other deposited tokens, MonoX Finance revealed in a post. The haul amounted to $31 million worth of tokens on the Ethereum or Polygon blockchains, both of which are supported by the MonoX protocol.
Specifically, the hack used the same token as both the tokenIn and tokenOut, which are methods for exchanging the value of one token for another. MonoX updates prices after each swap by calculating new prices for both tokens. When the swap is completed, the price of tokenIn—that is, the token sent by the user—decreases and the price of tokenOut—or the token received by the user—increases.
By using the same token for both tokenIn and tokenOut, the hacker greatly inflated the price of the MONO token because the updating of the tokenOut overwrote the price update of the tokenIn. The hacker then exchanged the token for $31 million worth of tokens on the Ethereum and Polygon blockchains.
There’s no practical reason for exchanging a token for the same token, and therefore the software that conducts trades should never have allowed such transactions. Alas, it did, despite MonoX receiving three security audits this year.
Blockchain researcher Igor Igamberdiev took to Twitter to break down the makeup of the drained tokens. Tokens included $18.2 million in Wrapped Ethereum, $10.5 in MATIC tokens, and $2 million worth of WBTC. The haul also included smaller amounts of tokens for Wrapped Bitcoin, Chainlink, Unit Protocol, Aavegotchi, and Immutable X.
Only the latest DeFi hack
MonoX isn’t the only decentralized finance protocol to fall victim to a multimillion-dollar hack. In October, Indexed Finance said it lost about $16 million in a hack that exploited the way it rebalances index pools. Earlier this month, blockchain-analysis company Elliptic said so-called DeFi protocols have lost $12 billion to date due to theft and fraud. Losses in the first roughly 10 months of this year reached $10.5 billion, up from $1.5 billion in 2020.