Just a few days back (Apr 28 2022), Deus Finance was exploited for the second time, and hackers managed to siphon $13.4million. Their first theft was $3million just this March. See the tweet here. More importantly, the exploit occurred on the Fantom Network.
What is Deus Finance?
Deus Finance is a marketplace of decentralized financial services, and allows developers to build financial services such as futures trading, lending and options on its platform. Deus supports multiple chains, including Ethereum, BSC, Polygon and Avalanche, and is backed by multiple recognized partners such as gate.io and SpookySwap.
What happened?
The hacker utilized a flashloan-assisted manipulation of price oracles that “reads from the StableV1 AMM - USDC/DEI pair”. This allowed the attacker to manipulate the price of the liquidity pool consisting of USDC stablecoin and DEI, borrow funds using the artificially pumped DEI price, and make a profit after repaying it.
Data from the blockchain has revealed that about $143 million were borrowed as a flash loan, and allowed the hacker to make a profit of $13.4million, draining the pool. PeckShield has warned that the actual losses may be much higher.
Flash Loans
Flash loans allow DeFi users (or in this case the hacker) to take a huge sum of money as a loan against zero collateral. However, this loan must be repaid before the transaction ends or the smart contract reverses the transaction (which is pretty damn fast, that’s why it’s called a flash loan)
Oracles
Liquidity pools, such as the USDC/DEI pool, require oracles to ensure they are correctly priced at all times and any borrowing is within limits that don’t exceed the total value of those pools. Oracles are essential to provide the blockchain trusted external information, and serve to verify the accuracy of the input data.
TLDR: (by PeckShield)
Back in March, Deus Finance has already been exploited around $3 million in DAI and ETH, using identical methods.
What happened to Fantom?
Given that this exploit happened on the Fantom network, the price of FTM dipped from $0.90 to $0.60 (down ~33%) from Apr 28 to May 1. Watch the live price action here.
Although every other non-stable coin among the top cryptocurrencies has seen a substantial sell-off over the past few days, it is evident that Fantom was the biggest loser of them all.
The Fantom blockchain was built to enable fast, low-cost transactions and was seen as a potential Ethereum rival. Back in Oct 2021, we saw its first moonshot from $0.30 to $3, but a series of events (including this one) have led its price to drop back down.
Just FUD?
Without more details about the Deus Finance exploit, we were left hanging as to whether the exploit was due to the application specifically or due to security issues with the Fantom framework. Whatever it is, markets are known to be emotional creatures, and any little negative fud news can send prices crashing down.
Personal Thoughts
Personally, I believe that all these are just FUD. The problem was mainly due to Deus Finance’s data oracles (which we have no idea which oracles they are using), and not so much about the Fantom network. Furthermore, I believe it says a lot about the protocol’s fundamentals when Deus manages to get hacked TWICE in such a short period of time.
At the same time, there was a rich degen (reportedly named Roosh) who leveraged and deposited 59million $FTM as collateral to borrow money from Scream. Next thing you know, the market dumps and his funds were locked on Solidly and Deus. Roosh ran to DeusDAO which sent $2M USDC for Roosh to repay his loan, spreading more FUD across the Fantom network. Read the full thread (with transactions) here.
In my opinion, Fantom is experiencing a rather dark period at this moment, fuelled by negative events and exploits (and degens leveraging in times like this). With true conviction in the network, one can only hope that Fantom’s fundamentals shine through all the FUD that pervades throughout the network. But from what I can see, many have left the boat looking for other opportunities that may reap better returns. What about you?
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