Inside the Solana Cypher Protocol Exploit: How Did It Happen?

Cypher Protocol exploit on Solana: Discover the security risks, the hacker’s moves, and the implications for the crypto community.

Ice man in Antartica freezing Solana.
Created by Kornelija Poderskytė from DailyCoin
  • Solana’s Cypher Protocol experiences a security exploit.
  • Immediate action was taken to freeze the affected smart contract.
  • The crypto community awaits further updates on the situation.

In the ever-evolving world of cryptocurrencies, security remains a paramount concern. The Solana-based Cypher Protocol, which resulted in a loss of over $1 million, has raised numerous questions. How did this happen? What vulnerabilities were exploited? Let’s delve into the specifics. 

Inside the Cypher Protocol Exploit

The Cypher Protocol, operating on the Solana blockchain, has recently faced a significant security breach. On Monday, August 7, the protocol’s team detected an exploit that posed potential risks to its operations.

On-chain data from Solana indicated that a hacker made away with approximately 38,500 SOL tokens and $123,184 USDC. This amounted to a total theft of $1,035,203. The immediate aftermath saw the protocol’s team freezing its smart contract to prevent further unauthorized activities.

Shortly after the exploit was discovered, the hacker transferred 30,000 USDC to a Binance account in a move that raised eyebrows. This action led to speculations about the hacker’s association with Binance and whether this transfer was an oversight on their part.

In the aftermath of the breach, the Cypher team reached out to the exploiter, though no response has been received as of yet. However, there’s a silver lining. Every Binance account can be traced back to its owner. The crypto community remains hopeful that the hacker’s decision to transfer USDC to Binance was a mistake, potentially leading to their identification.

Cypher Protocol Hack: Causes and Aftermath

While the exact nature and origin of the exploit remain under investigation, the repercussions of this exploit were felt far and wide within the crypto community. Following the exploit, the total value locked on Cypher plummeted by over 50%, dropping from $1.2 million to just under $510,000.

It is important to note that a large sum of the exploited fund belonged to Cypher users, attracted to the protocol’s generous loyalty program, rewarding users for engagement. These users staked their funds with Cypher, hoping it would lead to an airdrop

On August 8th, the day the exploit occurred, Cypher’s transferred volume surged to over $6 million, marking a three to four-fold increase compared to the previous week.

The loss of user funds underscores the security risks of liquid staking pools. One Twitter user warned Solana traders not to stake funds with projects offering airdrop rewards. 

The security breach in the Cypher Protocol is not an isolated incident in crypto. Such exploits can have ripple effects across the industry, affecting investor confidence and the reputation of the blockchain platform in question. 

On the Flipside

  • Solana’s (SOL) price did not react significantly to the Cypher exploit. At press time, the token was trading at $23,30, close to where it traded a week prior. 
  • Despite numerous high-profile hacking cases, blockchain hacks and scams are on a downtrend in 2023

Why This Matters

For crypto traders, understanding the security landscape of their investment platforms is crucial. Moreover, incidents like the Cypher Protocol exploit can lead to short-term market volatility. 

Read more about another high-profile hack

Unraveling the Curve Finance Hack, the Causes and Its Impact

Read more about PayPal’s crypto ambitions: 

PYUSD Stablecoin: How PayPal Plans to Bring Crypto to the Masses

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
David Marsanic

David Marsanic is a journalist for DailyCoin who covers the intersection of crypto, traditional finance, and government. He focuses on institutionalized crypto entities like major cryptocurrency exchanges and Solana, breaking down complex topics into easy-to-understand writing. David's prior experience as a business journalist at various crypto and traditional news sites has enabled him to maintain a critical approach to news while adhering to high journalistic integrity standards.