Cross-chain lending platform Abracadabra Money recently confirmed an exploit incident that resulted in the loss of $6.49 million. This episode directly affected the protocol’s Ethereum cauldrons, essential for lending the Magic Internet Money (MIM) stablecoin, using various assets as collateral.
The MIM development team has acknowledged the exploit and is already in the process of investigating it. They announced plans to compensate affected victims by adopting a token buyback and burn strategy. This rapid response aims to restore trust in the system and mitigate the negative impacts of exploitation.
The exploit, identified by blockchain security firm PeckShield, was initially funded with one Ether through cryptocurrency mixer Tornado Cash. However, the attack resulted in a significant destabilization of the value of MIM, an algorithmic stablecoin pegged to the US dollar. Following the announcement of the exploit, MIM lost its parity with the dollar, falling to $0.77, before partially recovering to the $0.94 mark, according to data from CoinMarketCap.
We are aware of an exploit involving certain cauldrons on Ethereum.
Our engineering team is triaging and investigating the situation.
To the best of its Ability, the DAO treasury will be buying back MIM from the market to then burn.
More updates are coming.
— 🧙🏼♂️ (@MIM_Spell) January 30, 2024
Compensation measures for victims of exploitation in the MIM protocol
According to a report from security firm CertiK, the exploit was caused by a rounding issue in the protocol. The attacker, by repeatedly using the “userBorrowPart()” function followed by “repay()” in cauldrons v4, managed to lend and repay amounts in order to drain funds from the contract.
This event comes after a challenging period for Magic Internet Money, which faced shutdowns in 2022 due to the fallout from the collapse of the Terra Luna ecosystem. In an effort to manage risks, the protocol increased the coin’s interest rate by 200% in August. Thus, demonstrating the volatile and reactive nature of the cryptocurrency market.
In this way, the current situation of MIM illustrates the complexity and challenges faced by algorithmic stablecoins in the cryptocurrency market. The Abracadabra Money team is actively seeking solutions to strengthen the security and stability of the protocol, aiming to prevent future exploitation and ensure the reliability of MIM as an essential stablecoin.
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