Euler Finance was attacked due to logical flaws in its donation and liquidation

According to PeckShield’s analysis, Euler Finance was used in a series of transactions on Ethereum (hacker transaction address) due to its logical flaws in donation and liquidation, resulting in a loss of about 197 million dollars. Specifically, DonateToReserves needs to ensure that donors still have excess collateral, and liquidation needs to ensure the “correct” conversion rate from loans to mortgaged assets. In addition, two hackers participated in the attack: 0x5F2… 8B8c and 0xBcA… 7c5C.

Interpretation of this information:

PeckShield, a blockchain security company, has stated that Euler Finance, a decentralized finance protocol on the Ethereum blockchain, suffered a loss of about 197 million dollars due to logical flaws in donation and liquidation. The hackers were able to exploit these flaws and conduct a series of transactions, transferring assets from Euler Finance to their own address. To prevent such attacks, PeckShield suggests that Euler Finance needs to ensure that their DonateToReserves feature considers the excess collateral of donors and that their liquidation process ensures the correct conversion rate from loans to mortgaged assets. In this attack, two hackers, identified as 0x5F2… 8B8c and 0xBcA… 7c5C, capitalized on Euler Finance’s weaknesses to carry out the breach.

The use of decentralized finance protocols has been gaining popularity in recent times; however, their potential to suffer from logical flaws poses significant risks. The Euler Finance breach is a clear example of such risks in the emerging field of DeFi. Donations play a vital role in DeFi projects, and their logic is critical to ensuring the smooth running of protocols. In this case, the DonateToReserves feature’s flaws enabled hackers to exploit the excess collateral of donors, making it necessary to review and enhance the logic of these features to prevent similar future attacks. Similarly, the liquidation process, which is necessary to maintain stability in DeFi projects, needs to ensure accurate conversion rates from loans to mortgaged assets. By enhancing this process, DeFi protocols can significantly reduce the likelihood of such attacks.

The Euler Finance breach highlights the importance of security in the DeFi sector. The decentralized nature of blockchain makes it significant for DeFi projects to improve security features continually. PeckShield’s analysis points to the need for intelligent contract auditing to ensure protocols function as intended, making them less susceptible to targeted attacks.