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$5 Million Reportedly Stolen Amid Terraform Labs Bankruptcy

Published

2 months ago

July 31, 2024

On Wednesday, July 31, the Terra Luna chain experienced a temporary halt due to a suspected exploit. The Terra hack announcement, made via Terra’s official account on X (formerly known as Twitter), notified users of the imminent halt at block height 11430400. During this time. Hence, all transactions on the network ceased as developers and validators worked to address the issue.

Inside The Latest Terra Hack

“Attention Terra users: Please be advised that the chain will be halted shortly at block height 11430400 and transactions will not be processed during this time,” the Terra team warned its users. Furthermore, the team raised suspicion on a potential Terra hack and promised necessary steps to combat the mishap. They added:

We will be working with the validators on Terra (phoenix-1) to apply an emergency patch thereafter to remediate a suspected exploit.”

An unidentified attacker exploited a vulnerability in a third-party module known as IBC hooks, used for cross-chain contract interactions and token transfers. This exploit allowed the attacker to siphon off value from bridged assets, impacting tokens such as USD Coin (USDC) stablecoin and Astroport. Moreover, preliminary assessments suggest that around $5 million in tokens might have been affected.

This Terra hack announcement led to a notable drop in the price of Terra Luna Classic (LUNC). The crypto fell over 4% following the announcement. Despite the initial decline, LUNC managed a significant recovery. As of writing, the LUNC price dipped by 2.84% to $0.00008116 on Wednesday.

Also Read: Terra Luna Classic To Raise LUNC Burn Tax To 1.5%?

Stolen Assets Report

The Terra chain experienced a significant security breach due to an unpatched vulnerability. The exploit allowed the attacker to mint tokens that had been Inter-Blockchain Communication (IBC) transferred onto Terra. The Terra hack vulnerability has surfaced amid crucial Terraform Labs bankruptcy deadlines.

For context, By utilizing a smart contract, an IBC call with IBC hooks, and a timeout mechanism, the exploiter managed to gain unauthorized access to these tokens. As a result, substantial amounts of assets, including 500,000 USDT and 2.7 BTC, were compromised. The Terra team is actively investigating the incident to determine the exact nature of the exploit and to patch the vulnerability.

The exploit followed a specific sequence of actions. A smart contract was instantiated on the Terra blockchain, which was then called using an IBC transfer that timed out. This timeout allowed tokens to arrive in the exploiter’s account.

Despite the exploiter’s wallet never receiving more than 56 LUNA and 7,800 USDC at a time, they managed to leave with millions of dollars’ worth of assets. The Terra team is working diligently to understand the intricacies of this exploit and to prevent future occurrences. In addition, Astroport has extended support. They stated:

“The Astroport contributors are working with the other chains and Cosmos builders to determine what measures can be taken. We will keep you updated as we learn more.”

Latest Update On Terra Hack

The Terra team has now resumed the block production. In post on X, they revealed, “The Terra chain has resumed block production at approximately 4:19 AM UTC today and the emergency chain upgrade is now complete. Transactions are now being processed, and users may resume normal activities.”

The team added, “Validators holding over 67% of the voting power on Terra have upgraded their nodes to prevent the exploit from recurring. More validators are expected to upgrade soon.” However, they haven’t shed light on what will happen to the stolen funds and how they plan a recovery.

Also Read: SHIB Price: Shiba Inu Burn Rate Soars 7300%, Is a Rally Ahead?