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Decentralized exchange LeetSwap, which operates on Coinbase’s layer-2 base chain, announced a temporary suspension of its trading activities after falling into a $630,000 exploit.
The exchange known for its decentralized trading services, revealed on X, formerly Twitter, that it had spotted a potential compromise in some of its liquidity pools. LeetSwap said it had “temporarily suspended trading to investigate the incident,” expressing its determination to resolve the issue promptly and transparently.
Because our DEX is derived from Solidly, our factory had a safety pause feature.
We determined that some pool liquidity may have been compromised and have temporarily halted trading to investigate.
— LeetSwap (@LeetSwap) August 1, 2023
The stock market claimed that it is working closely with on-chain security experts to assess the extent of the exploit and take the necessary steps to restore the locked liquidity. The exchange’s commitment to working with security professionals demonstrates the importance of community participation and robust security measures within the decentralized finance (DeFi) ecosystem.
We are working with on-chain security experts to find a way to restore the locked liquidity.
If you have not blocked your liquidity, you are free to remove it from the pools.
— LeetSwap (@LeetSwap) August 1, 2023
The incident illustrates the still growing challenges DeFi platforms they face when it comes to protecting their users’ funds and maintaining the integrity of their services.
After LeetSwap shut down its trading services, it asked users who hadn’t locked their liquidity to remove it from the mining pools. Liquidity freezing is a standard practice in the DeFi ecosystem, preventing malicious actors from removing funds from liquidity pools.
Unfortunately, the failure to lock in liquidity exposes the mining pools to potential vulnerabilities, as this incident demonstrates.
Blockchain Analysts Speculate Details of LeetSwap Exploit
Although the exchange hasn’t revealed many details about the nature of the exploit, there are various ones Blockchain Analysts tried to explain how this could happen.
According to Blocksec At a blockchain security company, the attacker used a specific manipulation technique the pool on the decentralized exchange (DEX). The process comprised three important steps.
First, the attacker performed an exchange, swapping $WETH (an Ethereum-based token) for another token. Let’s say A. This initial swap allowed them to position themselves strategically within the pool.
Next, the attacker used a function called _transferFeesSupportingTaxTokens to transfer Token A within the pool. After this transfer, they triggered the “Sync” function, which artificially increased the price of Token A manipulate the pricethe attacker was able to gain an advantage within the pool.
Eventually, the attacker took advantage of the increased value of token A and launched another attack Exchange, Conversion of token A back to $WETH. After executing their plan, they emptied the entire pool, effectively draining all the funds stored in it.
[email protected] on $Base was attacked and the loss was over 340 ETH. The attacker abused the _transferFeesSupportingTaxTokens public function to manipulate the pool:
1. Exchange $WETH for another token A.
2. Calling the _transferFeesSupportingTaxTokens function to transfer token A,… https://t.co/xU2fr5sgSr
— BlockSec (@BlockSecTeam) August 1, 2023
The attacker with address 0x705f performed multiple attacks targeting multiple pools. They managed to generate profits from these exploits and subsequently transferred the received funds to another address, 0x5b03.
Through this sequence of actions, the attacker exploited vulnerabilities in the pool’s mechanism, allowing it to profit at the expense of other users on the DEX. Blocksec’s analysis sheds light on the specific techniques used in the attack and underscores the importance of robust security measures within the DeFi e ecosystem.
Wintermute’s research lead repeated Blocksec’s analysis in separate tweets. Igor Igamberdievand other security companies like CertiK, PeckShield, beosine. They confirmed that the potential exploit allowed the attacker to acquire 342.5 ETH, which is worth more than $630,000 at current rates.
The BALD token controversy is compounding Base’s woes
The LeetSwap vulnerability comes on the heels of another Base-related controversy surrounding meme token BALD. The bald head The token deployer performed a rug pull, removing millions of dollars worth of liquidity from the token, causing the price to drop sharply. However, the move sparked allegations of exit fraud The project developer denied this any malicious intent.
As the DeFi space continues to grow, security remains a top concern for users and developers alike. Incidents like that of LeetSwap underscore the need for exchanges and platforms to invest in robust security measures and work with on-chain security experts to effectively prevent and respond to potential exploits.
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