Demystifying Blockchain Hacks in 2023

15 min read

Learn about the dynamics of the DeFi and cryptocurrency hacks and exploits in 2023.


The year 2023 witnessed a dynamic and transformative landscape in the world of blockchain technology, but it wasn't without its challenges. As blockchain technology continued to evolve and gain mainstream attention, it also attracted the attention of malicious actors seeking to exploit vulnerabilities for financial gain.

This blog delves into the noteworthy incidents that unfolded during the year, shedding light on the persistent threats that permeated the blockchain ecosystem. From smart contract vulnerabilities and private key compromises to price manipulation schemes and social engineering attacks, we will explore the critical events that underscore the need for enhanced security measures and vigilance within this ever-evolving digital realm.

Smart Contract Vulnerability#

Smart contract vulnerabilities continued to remain at the core of numerous blockchain attacks in 2023, serving as a persistent and significant threat vector.

The vulnerability of SafeMoon became glaringly evident as it suffered losses totaling approximately $8.65 million due to a critical smart contract flaw. The attacker exploited the public burn function within the SafeMoon contract, effectively enabling them to burn SFM tokens from any address. By skillfully manipulating this function, the attacker siphoned SFM tokens from the SafeMoon-WBNB liquidity pool, causing a significant nosedive in SFM token prices. In a shrewd move, the attacker proceeded to sell these tokens at an inflated rate within the same transaction, leading to the depletion of the remaining WBNB in the liquidity pool.

Curve Finance, a prominent decentralized exchange (DEX), found itself vulnerable to smart contract weaknesses, resulting in staggering losses surpassing $24 million. The attack specifically targeted the CRV/ETH liquidity pool and saw the exploitation of approximately 7,680 WETH and 7.193 million CRV tokens, collectively valued at $14.413 million. The root cause of this vulnerability was the absence of reentrancy protection, aggravated by a zero-day exploit within the Vyper programming language. This incident reverberated across various other Curve-based pools, accumulating losses that approached the $70 million mark.

Kyber Network, a concentrated liquidity protocol spanning multiple blockchain chains, bore the brunt of a relentless wave of exploits across six different chains. These exploits culminated in a colossal loss of approximately $48.3 million worth of assets. The underlying vulnerability stemmed from tick manipulation and the phenomenon of double liquidity counting. The attacker initiated their offensive by securing a substantial flash loan and proceeding to drain pools characterized by low liquidity. Manipulating prices and ticks through a series of swaps and position adjustments, the attacker executed multiple swap steps and cross-tick operations. The resultant double liquidity count precipitated the depletion of these critical pools, further exacerbating the extent of the damage.

Private Key Compromise#

Private key compromise has also become a prominent and unsettling attack vector within the blockchain landscape in 2023, casting a shadow of financial loss and security apprehension across the cryptocurrency realm.

Atomic Wallet, a widely-used cryptocurrency wallet, fell prey to a private key compromise, with identified losses exceeding $100 million. This unsettling incident stemmed from the compromise of user private keys, resulting in the pilfering of millions in assets. One unfortunate victim alone lost nearly $8 million in USDT. Meanwhile, on the Fantom network, Multichain grappled with a colossal loss exceeding $126 million due to a severe private key compromise. The attackers skillfully withdrew substantial sums of various assets, including $58 million in USDC, $30.9 million in WBTC, $13.7 million in WETH, and $4 million in DAI. This breach reverberated across various tokens, encompassing Chainlink, Curve DAO, YFI, Wootrade Network, and UniDex, with nearly a quarter of UniDex's total supply falling into the wrong hands.

Alphapo, a cryptocurrency payment service provider, confronted an unsettling breach within its hot wallets attributed to compromised private keys. The attacker orchestrated the theft of over $100 million in assets, encompassing cryptocurrencies like ETH, TRX, USDT, USDC, FTN, TFL, ETH, and DAI. In a parallel incident, Stake, operating across multiple chains, succumbed to an exploit, resulting in an estimated loss of $41 million. The compromise of private keys appeared to be the root cause of this security lapse, impacting assets on the Ethereum Mainnet, MATIC, and BNB chains.

Huobi Global's HTX exchange encountered a harrowing ordeal as its hot wallet became the target of a private key compromise, culminating in the loss of $8 million worth of ETH. Similarly, HTX (Huobi)'s hot wallets and HECO Chain's Ethereum Bridge bore the brunt of combined losses totaling approximately $99.3 million, attributed to a compromised operator account. This exploit led to the compromise of a spectrum of assets, spanning USDT, HBTC, SHIB, UNI tokens, USDC, LINK tokens, ETH, and TUSD.

Poloniex, a reputable cryptocurrency exchange, grappled with a debilitating attack rooted in private key compromise, resulting in a staggering loss exceeding $123 million. This compromise was attributed to a coordinated phishing attack or the dissemination of a malicious virus. Meanwhile, Orbit Chain faced its own trials as it was exploited in a series of transactions, incurring a loss of approximately $81.6 million. The exploit seemingly hinged on the manipulation of valid signatures for unauthorized transactions, with attackers likely fabricating signatures by compromising the owner's private keys.

Price Manipulation#

The blockchain landscape also witnessed an alarming surge in price manipulation incidents, totaling over 30 cases that inflicted substantial financial losses on various cryptocurrency projects. Among these incidents, BonqDAO stood out as a glaring example, where an Oracle hack triggered a nefarious price manipulation scheme targeting AllianceBlock tokens. This exploit resulted in staggering losses of approximately $120 million, underscoring the gravity of the vulnerability.

Hundred Finance also fell victim to the scourge of price manipulation, as a savvy hacker exploited the exchange rate dynamics between ERC-20 tokens and htokens. This manipulation enabled the attacker to withdraw a greater quantity of tokens than initially deposited, leading to estimated losses amounting to $7 million, painting a grim picture of vulnerability within the ecosystem.

Jimbos Protocol, another unfortunate casualty of price manipulation, experienced a loss of 4048 ETH, equivalent to roughly $7.7 million. The attacker orchestrated this exploit by ingeniously executing a flash loan of 10,000 ETH and subsequently conducting strategic token swaps. This maneuver artificially inflated the price of JIMBO tokens, allowing the attacker to reap substantial profits from the scheme, further exemplifying the need for heightened vigilance.

The Herencia Artifex project became a substantial victim of price manipulation, suffering a colossal loss amounting to $43.35 million. The vulnerability stemmed from an arbitrary address spoofing attack resulting from the improper integration of ERC-2771 and Multicall standards. This vulnerability had widespread implications, impacting approximately 515 Thirdweb-deployed tokens on the Ethereum Mainnet. Seizing the opportunity, the KyberSwap Exploiter targeted HXA Coin (HXA), the native utility token of the Herencia Artifex project, ultimately extracting a significant amount of funds.

To combat and mitigate the menacing threat of price manipulation attacks, particularly those involving Oracle manipulation, a multifaceted approach is imperative. Foremost, organizations must exercise discernment when selecting Oracle providers, favoring those with established credibility and a proven record of security and reliability. Decentralization emerges as a pivotal principle to embrace, where the adoption of decentralized oracles, drawing data from multiple independent nodes or sources, significantly mitigates the risk associated with single points of failure or manipulation.

The implementation of robust data aggregation and consensus mechanisms within Oracle solutions stands as a linchpin in defense. These mechanisms entail the collection of data from diverse sources and the determination of the most accurate and reliable information through consensus algorithms. Further strengthening the security posture, the integration of rate-limiting and circuit-breaker mechanisms assumes paramount importance. These defensive measures are adept at detecting aberrant behavior and temporarily suspending operations, serving as a bulwark against catastrophic asset losses in the event of manipulation attempts.

Twitter Account Compromise#

This year also bore witness to a disconcerting surge in Twitter account compromises, sounding the alarm on security and cyber hygiene practices within the digital realm. Among these incidents, the compromise of Robinhood Exchange's Twitter account marked a significant episode. The attackers unleashed a misleading tweet, announcing a fictitious token launch on the BNB chain, illicitly gaining around $8,200 in ill-gotten proceeds. Similarly, Azuki experienced a distressing attack where an unfortunate user transferred over $750,000 in USDC to the assailant's wallet. Additionally, the deployment of malevolent links masquerading as surprise land mints precipitated the loss of 196 NFTs and 3.9 ETH, culminating in an astounding total loss exceeding $1.7 million. Kucoin, too, found itself vulnerable as malefactors compromised their Twitter account for a 45-minute window, enabling a scammer to perpetrate 22 fraudulent transactions, purloining assets valued at approximately $22,628.

The compromising of Twitter accounts belonging to both the Gutter Cat Gang and Mira Murati, the esteemed CTO of OpenAI, underscores the enduring menace of social engineering tactics. In the case of the former, a suspected SIM swap attack exacted a toll exceeding $1 million worth of NFTs, with hackers deftly disseminating deceptive links and siphoning funds from user hot wallets. Simultaneously, Mira Murati's Twitter account became an unwitting conduit for executing a fraudulent cryptocurrency airdrop, culminating in the theft of approximately $110,000. Even the venerable figure of Vitalik Buterin did not elude the deluge, as malefactors disseminated a phishing link intertwined with a Proto Danksharding NFT. This nefarious maneuver resulted in losses exceeding $700,000, including the misappropriation of prized CryptoPunk NFTs. These incidents serve as an urgent call to arms, accentuating the pressing need for enhanced vigilance and the fortification of security measures within the ever-evolving Web3 landscape.

To effectively combat these threats, the imperative lies in adopting a comprehensive and proactive approach. One cornerstone of this strategy involves the robust implementation of two-factor authentication (2FA) methods, pivotal in fortifying security. Embracing 2FA or Multi-factor authentication (MFA) on platforms supporting these features, such as Google Authenticator or Authy, is highly recommended over SMS-based authentication due to its superior security credentials. Moreover, exercising discretion when divulging personal information on public forums or social media platforms is of paramount importance, necessitating the avoidance of sharing sensitive details such as full names, addresses, phone numbers, and birthdates. These seemingly innocuous pieces of information can serve as potent weapons for malicious actors, enabling impersonation and fraudulent activities.

Equally critical within this multifaceted defense strategy is the safeguarding of mobile devices. Employing robust protective measures, including strong PINs, patterns, fingerprints, passwords, or facial recognition, is instrumental in defending these devices against potential intrusions. Furthermore, securing the SIM card with an alphanumeric PIN is imperative, with a mandate to steer clear of easily guessable options. Prudence dictates a reevaluation of associating primary phone numbers with critical accounts, with the option to utilize disposable or secondary electronic SIM cards when deemed necessary. The advantageous feature offered by select mobile network carriers, enabling the locking or freezing of mobile numbers to deter unauthorized transfers, should be promptly activated to augment SIM card security.

In the realm of thwarting phishing attempts, users must exercise unwavering vigilance and discretion. Caution should be the guiding principle when encountering unsolicited requests for personal information, particularly those purporting to originate from banks, government agencies, or healthcare providers. It is essential to keep in mind that legitimate entities refrain from soliciting sensitive data online. In instances where suspicions surrounding the authenticity of communications arise, the prudent course of action entails independent verification of such requests by directly contacting the respective agency or institution. 

Social Engineering#

Social engineering attacks can be highly effective and often rely on manipulating human behavior rather than exploiting technical vulnerabilities. In 2023, a notable incident unfolded within the blockchain space, exemplifying the impact of such attacks. PeopleDAO fell victim to a social engineering attack that resulted in the theft of 76 ETH, equivalent to approximately $120,000.

The attack targeted the multi-signature wallet of the PeopleDAO community treasury, which was managed on the Safe platform. This DAO employed a Google Form to collect information related to contributor rewards on a monthly basis. However, a critical lapse in security occurred when the accounting lead inadvertently shared a link with edit access in a public Discord channel. The attacker seized this opportunity, gaining unauthorized access to the Google Form.

Once inside, the hacker surreptitiously inserted a transaction for 76 ETH, directing the payment to their own wallet, and then concealed this transaction field. This concealment played a pivotal role in the success of the attack, as it went unnoticed during the subsequent review process. The accounting lead, responsible for verifying and processing rewards, did not detect the hidden transaction.

The attacker then exploited this lack of scrutiny to their advantage. The accounting lead proceeded to send the file containing the concealed transaction to the CSV Airdrop tool within the Safe platform, with the intention of distributing the rewards to contributors. The transaction involving the 76 ETH payment was included among approximately 80 other transactions that were being processed simultaneously. In the midst of this activity, six out of the nine multi-signature signers failed to notice the malicious transfer, allowing the transaction to be signed and executed without their knowledge.

This incident serves as a stark reminder of the dangers posed by social engineering attacks, where manipulative tactics target human vulnerabilities and lapses in judgment. As the blockchain ecosystem continues to evolve, it is imperative for organizations and individuals to prioritize not only technical security measures but also to raise awareness and educate stakeholders about the risks associated with social engineering. Vigilance, training, and robust security protocols are essential in safeguarding against such attacks and maintaining the integrity of blockchain projects and organizations.

Logic Error#

Logic errors, which often originate from unintentional flaws in code implementation, have demonstrated their potential for catastrophic consequences within the blockchain ecosystem. Euler Finance fell prey to a significant security breach, revealing the magnitude of damage that can arise from logic errors, resulting in a staggering loss of approximately $200 million.

The vulnerability that paved the way for this exploit was deeply rooted in Euler Finance's practice of allowing donations without imposing a requisite account health check. The critical flaw resided within the token implementation, specifically in the donate to reserve function. Within the protocol framework, the Liquidation module had the noble objective of repaying the entire debt owed by a user found in violation. However, the unfolding of a critical logic error became apparent when the protocol encountered a scenario where the collateral assets held by the user failed to meet the expected repayment yield.

This exploitable situation came to light when borrowers possessed multiple collateral assets, and the removal of all these assets failed to restore the borrower's solvency. Consequently, the protocol defaulted to utilizing whatever collateral the user had at their disposal, irrespective of its adequacy in covering the outstanding debt. This critical oversight allowed malicious actors to manipulate the system, embarking on a series of transactions that culminated in the profound loss of approximately $200 million.

The Euler Finance incident serves as an unequivocal reminder of the paramount importance of rigorous code auditing, extensive testing, and comprehensive security assessments within the blockchain industry. Logic errors often prove elusive and arduous to pinpoint, underscoring the necessity for comprehensive reviews and meticulous testing as pivotal elements in preserving the security and trustworthiness of blockchain protocols. The incident further underscores the imperative of unwavering diligence and the proactive implementation of measures to unearth and rectify vulnerabilities, thus preempting their exploitation by malicious entities.

Supply Chain Attack#

Supply chain attacks pose a significant threat in the blockchain industry, and in 2023, Ledger experienced a substantial security breach that exemplified the repercussions of such attacks. The breach targeted Ledger Connect Kit, a critical Javascript library designed to facilitate connections between websites and wallets, ultimately resulting in a large-scale supply chain attack with widespread implications. This incident led to the loss of assets valued at over $610,000.

The orchestrator behind this exploit was a former Ledger employee who had reportedly fallen victim to a phishing attack. Regrettably, this compromise of the employee's security inadvertently granted malicious actors access to the employee's NPMJS account, a widely-used package manager for JavaScript. Seizing this opportunity, the attackers proceeded to upload and publish malicious files within the Ledger Connect Kit.

These compromised versions of the library were equipped with a malicious drainer, a deceptive component that deceived users into unwittingly authorizing malicious transactions. The consequences were far-reaching, as the attackers utilized this tactic to pilfer various tokens and currencies across multiple decentralized exchanges (DEXs). This nefarious supply chain attack underscored the critical importance of maintaining the integrity of every component within the blockchain ecosystem, from libraries to dependencies. Furthermore, it serves as a poignant reminder of the ever-evolving tactics employed by malicious actors in their relentless pursuit of exploiting vulnerabilities in the supply chain. In response, the blockchain community must remain vigilant, employing robust security measures and proactive strategies to safeguard against such attacks and protect the assets and data of users and organizations alike.

Malicious Governance Proposal#

Malicious governance proposals represent a concerning attack vector within the blockchain space, with Tornado Cash and Atlantis Loans serving as stark examples of the financial losses such attacks can inflict.

Tornado Cash experienced a security breach when its governance contract fell victim to multiple transactions orchestrated by an attacker. The assailant initially presented a seemingly legitimate proposal, which garnered user votes and was successfully passed. However, once the proposal was approved, the attacker executed a series of malicious actions. This included causing the contract to self-destruct, deploying a malicious contract at the same address, and subsequently executing the code from this malicious contract. These cunning maneuvers allowed the attacker to amass a staggering 1.2 million votes through their nefarious proposal. As a result, they gained complete control of the DAO, ultimately draining the tokens held within it. The attack exploited the fact that the number of malicious votes exceeded the threshold of 700,000 valid votes.

Similarly, Atlantis Loans fell prey to a governance attack, resulting in the loss of funds exceeding $1.15 million. In this case, the exploiter cunningly positioned themselves as the administrator of the token's proxy contract, effectively gaining control over and manipulating its functionalities. This level of access allowed the attacker to introduce a backdoor function by altering the logic of the contract, enabling the unauthorized transfer of tokens held by users.

These incidents underscore the critical importance of robust governance protocols and meticulous scrutiny of proposals within blockchain projects. They serve as a reminder that malicious actors can exploit governance mechanisms to seize control and misappropriate assets. In response, the blockchain community must continuously refine governance frameworks, enhance security measures, and exercise vigilance to safeguard against such malicious governance proposals and protect the integrity of decentralized systems.

The Role of Neptune Mutual#

In a year marked by challenges and vulnerabilities within the blockchain ecosystem, we recognize the paramount importance of security and risk mitigation. As we navigate the intricate landscape of blockchain technology, it's crucial to highlight solutions that empower users and projects alike. Allow us to introduce Neptune Mutual, a pioneering parametric DeFi insurance protocol built on Ethereum. At Neptune Mutual, we're at the forefront of introducing a paradigm shift in the world of decentralized finance by embracing parametric triggers. These transparent and predefined triggers ensure objective responses to incidents, allowing our valued policyholders to swiftly claim their payouts.

In the unfortunate event of security breaches or incidents, the establishment of a dedicated cover pool with Neptune Mutual could have significantly alleviated the consequences of the affected protocols. Neptune Mutual extends its comprehensive coverage to users who suffer losses of funds or digital assets due to smart contract vulnerabilities, thanks to our innovative parametric policies.

Collaborating with Neptune Mutual eliminates the need for users to navigate the often intricate process of providing detailed proof of loss. Our unwavering commitment to expeditious incident resolution means that once an incident has been verified and resolved through our robust framework, we prioritize the swift disbursement of compensation. This ensures immediate financial relief for those affected, underscoring the critical role played by Neptune Mutual in supporting and safeguarding the DeFi community.

Our marketplace is not confined to a single blockchain network; rather, we extend our operations across various prominent ones, including EthereumArbitrum, and the BNB chain. This expansive presence enables us to cater to a diverse spectrum of DeFi users, offering them protection against potential vulnerabilities and reinforcing their trust in the ecosystem.