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Hedera (HBAR) had to freeze normal network activities this week after discovering a hack in their Smart Contract Service code. The company acknowledged the hack in a Tweet stating that the attackers exploited the Smart Contract Service code of the Hedera mainnet to move Hera tokens from several accounts.’
How The Hack Occurred
Today, attackers exploited the Smart Contract Service code of the Hedera mainnet to transfer Hedera Token Service tokens held by victims’ accounts to their own account. (1/6)
— Hedera (@hedera) March 10, 2023
The Hedera development team explained how this dark event occurred. According to the report, the hackers exploited the Smart Contract Service code of the Hedera mainnet to move Hedera tokens from victims’ accounts to their accounts.
The accounts targeted were those used as liquidity pools on several decentralized exchanges (DEXs) that use the Uniswap version 2-derived contract code. The code was moved to the Hedera Token service, including @Pangolin_Hedera, @SaucerSwapLabs, and @HeliSwap_DEX.
Next, the attackers moved the tokens over the HashportNetwork bridge, which was disabled after the bridge operators noticed the suspicious activity. The Hedera community teamed up with other experts to turn off the mainnet proxies and prevent the attacker from stealing more tokens.
Turning off the mainnet proxies eliminated user access to the mainnet temporarily. According to the tweets, the team has identified the cause of the attack and is currently working on solutions. Once these solutions are ready, the Hedera council members will sign transactions to approve the updated code on the mainnet to eliminate the vulnerability.
After a successful installation, the mainnet proxies will be reactivated, and normal activities will resume on the network.
How The Hack Affects HBAR holders And The Crypto Market At Large
Crypto investors dread falling victim to crypto hacks and rely on blockchain technology to secure their assets. However, over the years, it has become a fact that there is no secure blockchain, as there have been notable hacking incidents in this period.
Hedera felt the effects of the latest hack as the Total Value Locked (TVL) of the network fell from $36.81 million before the hack to $24.57 million afterward. This value represents a decline of more than 33% in the TVL.
However, HBAR, the platform’s native token, did not deviate much from its price and is still trading within the same price range. Despite HBAR’s price resilience, hacking events fuel FUD levels in the market and make investors lose faith in blockchain security.
The Crypto Industry and Hacking Incidents
Hacking is a real challenge for crypto developers and requires continuous research and updated security measures to control its destructive capacity. Hackers always find innovative ways to modify their approach and fleece investors, hoping to leave no traces behind.
Here are some notable ones.
- 51% Attacks: During verification, miners review transactions to ensure credibility. However, if a hacker seizes control of at least half of the mining process, it will lead to a security breach.
The hackers can decide to create a second version of the blockchain, known as a fork, where some transactions will not reflect. It will allow the hacker to create a new set of transactions on this fork and fraudulently manipulate the version sent to the original blockchain.
These attackers are common in smaller blockchains since it is more difficult for hackers to seize control of the larger and more complex blockchains.
- Creation Errors: Security glitches and errors can arise during the creation of a blockchain. This defect is common with larger and more complex blockchains. Hackers target these defects and try to identify the vulnerabilities to launch a specialized attack on the blockchain.
Smart contracts are susceptible to such attacks since they operate on the blockchain network. Smart contracts handle the financial aspects of contracts and automate tasks. If a blockchain is flawed and uses smart contracts, hackers can steal money or tokens without getting detected.
Since the fraudulent activity will not reflect on the blockchain and transactions cannot be changed, creating a fork is the only way to recover stolen money. This fork is recognized as the new blockchain for future transactions.
- Inadequate Security: Most blockchain hacks occur on exchanges. These exchanges support the trading of cryptocurrencies and hold crypto tokens in the case of centralized exchanges. However, hackers can easily infiltrate the system and steal funds and tokens if the exchange lacks proper security measures.
These three methods are the most popular ones devised by hackers to break into a cryptosystem. Sadly, over the years, blockchain hacking is increasing, with crypto traders and investors dreading the attacks and the resulting loss of funds.
Also, apart from hacks, there is the issue of crypto-related scams that fill investors with promises and fleece them of their money for worthless crypto projects.
These issues have increased the calls for stricter crypto regulations, with the American Security and Exchange Commission (SEC) leading the charge. However, some crypto experts believe that excessive regulation could defeat the true purpose of cryptocurrencies, making them centralized.
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