Impossible Finance (IF) is the latest decentralized finance (DeFi) protocol to be the victim of a flash loan attack which saw hackers cart away 230ETH equivalent to $500,000. IF is a multi-chain incubator for DeFi projects. It aims to make decentralized finance accessible to everyone by providing a level playing ground for DeFi activities such as swapping, staking, liquidity provision all at a low cost and maximum speed.
The latest flash loan attack is one out of many which have been occurring since last year. According to reports, the latest attack was done similarly to one that occurred on BurgerSwap. The flash loan attack on BurgerSwap, another decentralized automated market maker (AMM) built on Binance Smart Chain (BSC) occurred towards the end of May. The BurgerSwap flash loan attacker made away with $7 million using a non-existent token. Other flash loan attacks have occurred on different Decentralized exchanges as well– PancakeBunny, Bogged Finance, Swirge Finance, BeltFinance.
WatchPug, a security establishment in partnership with Impossible Finance observed that the attacker took advantage of the DeFi protocol by making many swaps consecutively at the same price until he emptied the liquidity pool (LP), which according to the firm would otherwise be impossible as a result of slippage. A deficiency in the LP’s smart contract gave the attacker a leeway to pull the stunt. The attacker swapped the DeFi protocol’s utility token, IF, to Binance USD (BUSD) many times and then swapped to Binance coin (BNB) to refund the loan.
Impossible Finance Assures Users of Compensation
Furthermore, Impossible Finance reported that it has funds in reserve to insure and reimburse liquidity providers (LPs) against the loss incurred. The protocol assured that those affected will be completely refunded. Impossible Finance had earlier this month raised $7 million in a round from venture capital firms and other institutional investors to set up an incubator DEX for DeFi projects.
Flash loans allow users of DeFi Protocols to borrow non-collateralized loans such that they can obtain the loans and perform an activity, and repay the loan all in a single transaction. However, hackers have been taking advantage of the bugs on these protocols to execute these attacks as most of them were basically forked from other protocols.
Last month, BSC advised that DeFi protocols should work with audit firms to debug their projects to prevent these attacks. An attack had occurred on BeltFinance that saw hackers elope with $6.9 million. The hackers performed the attack in 6 transactions. BSC noted that these attacks were coordinated and protocols should also have funds in SAFU in the event of an emergency.
Price of IF Token Dips by 60%
The attack on the IF Protocol witnessed a huge dip in price of the protocol’s utility token. The price moved from $2.80 on June 21 to a low of $0.14 before jumping to $1 at the time of writing this report. All-time-high (ATH) of the IF token was $7.61 as of June 19, dipping by 86% to its current price. Attack on BeltFinance also saw its price dip by 50% in May.
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