Last week, Ethereum, the leading blockchain utilizing a proof-of-stake mechanism, faced its most significant surge in unauthorized transactions this year. Data from Chainalysis revealed that the proportion of illicit transactions compared to the total number of transactions on the Ethereum network reached an alarming level of nearly 2% between July 30 and August 5. This peak exceeded the previous high of 1.46% observed in January.
The notable uptick in illicit activity coincided with a major security breach on Curve Finance, a decentralized exchange operating on the Ethereum platform. Exploiting vulnerabilities in the Vyper programming language, an attacker managed to siphon off around $70 million from Curve’s pools on July 30.
Security analysts at PeckShield reported that as of August 6, approximately $52.3 million had been successfully recovered. The hacker returned $10 million worth of ETH to JPEG’d, a decentralized lending protocol. As an expression of appreciation, JPEG’d rewarded the hacker with a $1.1 million bounty. Furthermore, the attacker returned the stolen assets to Alchemix on August 6, 2023, as confirmed by a tweet from Alchemix officials.
Additionally, if the attacker returned 90% of the money voluntarily by August 6, they would get a 10% bounty. Furthermore, they introduced a significant 10% of exploits funds to individuals who can offer reliable details that result in the recognition and eventual legal action against the individual responsible for the exploitation.
Looking at such activities in early 2023, the Ethereum community has proposed to mitigate such activities primarily prevalent on Ethereum. A report by Todayq News on July 5, 2023, introduced ERC 7265 as an innovative protocol designed to revolutionize how DeFi platforms manage potential security breaches and safeguard user assets. This newly proposed ERC 7265 standard incorporates a vital component that acts as a safeguard integrated into the smart contracts of DeFi protocols.
In July, the DeFi sector faced substantial setbacks, with losses totaling $389.82 million attributed to hacks and exploits on platforms including Arcadia Finance, Curve Finance, and Multichain, among others. Notably, Ethereum bore the brunt of these attacks, suffering a staggering $350 million loss across 36 incidents. Particularly striking was the case of Multichain, which experienced a single devastating loss of $231 million due to an exploit exploiting access controls.