BlockSec Prevents $5 Million Hack

Updated: 20 March 2023

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BlockSec, a blockchain security company, has successfully prevented a hacker from stealing 2,900 ether (about $5 million) from ParaSpace. Such attacks have been prevalent in the blockchain sector. However, blockchain security companies strive to enhance the sector’s security and transparency.

ParaSpace is a decentralized lending protocol allowing users to borrow various crypto assets on the Ethereum blockchain. The platform enables users to lend NFTs or other assets to receive a percentage of interest and lets users use borrowed funds as collateral.

However, a vulnerability in the lending protocol of the smart contract enabled the hacker to borrow assets with fewer NFTs than required as collateral. This allowed the attacker to drain the liquidity protocol. The exploiter’s first attempt failed to execute the transaction because of insufficient gas fees. At the same time, BlockSec detected the hack and changed the protocol in time to prevent the hacker from liquidating the crypto asset.

BlockSec detected potentially harmful activities and acted quickly as a white hat, intervening in a smart contract worth 2,900 ETH (equivalent to $5 million) and implementing changes to prevent the protocol from being hacked. According to Lei Wu, co-founder and CTO at BlockSec, the internal security function automatically monitored the transaction linked to the hack. He further stated that the security function could prevent a hack in real-time.

ParaSpace Temporarily Pauses Operations

ParaSpace has announced that it has halted all operations until they have remedied the identified vulnerabilities in the system. Users can carry out any transactions, withdrawals, or deposits once the smart contract team has fixed the vulnerabilities.

“We will resume protocol functionality once we have re-audited our platform with Secure3 and we are in active conversations with additional auditors and security experts,” ParaSpace said.

Despite pausing all operations temporarily, the platform has assured its users in a tweet that all user funds and assets were safe and secure and they compromised no NFTs. However, the smart contract lost 50-150 Ethereum because of the attacker “swapping between tokens during the exploit.” ParaSpace promised to allocate these funds to the smart contract from its pocket to ensure that they incurred no loss.

“We alongside @BlockSecTeam have identified the cause of the exploit that occurred earlier on the ParaSpace protocol, and we are relieved to share that all user funds and assets on ParaSpace are safe and secure. No NFTs were compromised and financial losses to the protocol are minimal,” read the tweet.

In an interesting turn of events, the hacker left an on-chain message asking for some of the gas fees of 0.7 ETH he spent during the ParaSpace Hack.

“I couldn’t make it work because of a stupid gas estimation error. Since I lost a lot of money trying to make it work, it would be nice to get at least some of that back… good luck.”

BlockSec has been active in preventing hacks in the blockchain industry. The security firm saved $2.4 million from the Platypus Finance exploiters in February 2022 and prevented hackers from stealing $3.8 million from Saddle Finance in April 2022.

The blockchain industry has seen many hacks since its inception. With BlockSec and other security firms, the sector is making significant progress in ensuring security and transparency. The incident at ParaSpace reminds companies to regularly assess and update their security measures to stay ahead of potential threats. With the blockchain industry’s continuous growth and expansion, securing the ecosystem must remain a top priority.