DeFi Protocol Arcadia Finance Suffers $455K Hack on Ethereum, Optimism

DeFi Protocol Arcadia Finance Suffers $455K Hack on Ethereum, Optimism

An incident occurred in which a hacker exploited a code vulnerability within the noncustodial decentralized finance (DeFi) protocol known as Arcadia Finance, resulting in the draining of approximately $455,000. The hack was brought to light by PeckShield, a blockchain investigator, who identified the cause as a lack of validation for untrusted input within the code. This flaw enabled the hacker to siphon funds from the Ethereum (darcWETH) and Optimism (darcUSDC) vaults.

Arcadia Finance code required no validation of untrusted input. Source: PeckShield

Arcadia Finance acknowledged the hack two hours after being notified by PeckShield and promptly halted the contracts to prevent further loss of funds.

While investigations are ongoing, it has been revealed that Arcadia's code harbors an additional vulnerability. This vulnerability, if exploited, could have severe consequences for the protocol. PeckShield highlighted the absence of reentrancy protection, allowing for immediate liquidation to bypass internal vault health checks.

The majority of the stolen funds, around 180 Ether (ETH) valued at over $103,000 at the time, were taken from Optimism and subsequently laundered through Tornado Cash. However, the stolen tokens on Ethereum remain parked within the suspected wallet address.

In the second quarter of 2023, the crypto space experienced multiple hacks and exploits, resulting in a collective loss exceeding $300 million. According to a report from CertiK, a blockchain security company, a total of 212 security incidents were recorded during the quarter, leading to a loss of $313,566,528 from Web3 protocols.

Comparing the data to the previous year's second quarter, CertiK observed a decline of 58% in crypto hacks. Among the incidents, the BNB Smart Chain encountered the highest number, with 119 cases causing losses amounting to $70,711,385.

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