Osmosis Network, a Cosmos-based DeFi protocol was stopped at block #4713064 June 8th, after it discovered a critical vulnerability within its liquidity pools. This exploit occurred just two blocks prior to the halt.
Reddit user first reported the attack. He warned that customers who deposit money to Osmosis pools would be rewarded with an additional 50% if they were removed. Although the post was deleted, users started exploiting the vulnerability to steal Osmosis funds. In one instance, the malicious entity provided liquidity for 101,230 OSMO, and then exited the position with 151,084 OSMO tokens. They were able to do this at least 30 more times.
“Update: A bug has been found and a fix written. Validators are encouraged to continue testing before coordinating a restart. In the coming days, a full bug report and an action plan will be available for chain upgrade testing.
The protocol’s team provided additional information about what happened, including admitting that $5,000,000 were overdrawn. They also promised to make “multiple changes to our security protocols to assure the quality and safety Osmosis.”
It should have been detected. It was not noticed by internal testing, which was focusing on the upgrade’s more advanced functionality.
(@osmosiszone), June 8, 2022
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