Wintermute lost $160 million from a hack
How Wintermute, a market maker lost $160 million from a hack on their DeFi operations
First of all, should we be worried about this?
Well, this is getting way out of hand. To the point where you should seriously re-evaluate your situation and take the necessary steps to protect your investments in the crypto space, especially if we are talking about investments worth millions.
We are not talking here about crypto prices going down, we are specifically referring to the hacks which have been happening lately.
Back in March, we reported about the $620 million hack, where North Korean hackers have stolen nearly $400 million in cryptocurrencies during 2021, and this year they were back with the recent hack on Axie Infinity, which is a crypto based video gaming company. They did manage to steal $620 millions worth of Ethereum, what it is considered to be one of the biggest hacks in the crypto space.
Then, even more recently, we had another hack which was smaller in scale, where roughly $5 million worth of crypto were stolen from different users who have been using Phantom wallet. According to Coindesk, this was mainly impacting mobile wallet users where the attacker was able to initiate and approve transactions on behalf of the wallet owners.
Now, we have Wintermute hack.
Wintermute, a crypto market maker lost $160 million in a DeFi hack
First of all, what is a market maker?
A market maker can be an individual or a member firm of an exchange that buys and sells securities for their own account. That means they do not serve as an intermediary where they facilitate a transaction but they buy for their own with the hope to sell it at a higher price later on and make a profit out of it. The price they buy is called bid and the price at which they sell is called ask. The difference between those two is called spread which is basically the profit from those trades. They also provide liquidity as they always are willing to buy for the bid price and sell for the ask price.
Wintermute is a DeFi (decentralized finance) crypto market maker, which basically provides liquidity for the crypto exchanges. It is a leading market maker platform in the space. Apparently their platform got hacked and they lost $160 million worth of crypto from this hack alone. As per founder’s comments, hack has happened only on DeFi operations. Their CeFi (centralized finance) and OTC (over the counter) operations have not been impacted.
It seems like 90 assets were been hacked. From those, two of them were more than $1 million each. Also, the founder tweeted about the same issue and stated that they remain solvent with twice over that amount in equity left.
It is still not clear how the hack happened and what exactly were the issues on this one but that is something which we will understand in upcoming days most likely.
Security breaches and hacks are common in the traditional world as well. Not sure if you came across the article about the major hack. Apparently, as per Uber’s comments, this hack came from a 18 years old kid who is part of LAPSUS$ gang and they are known for such attacks.
Final thoughts
In the traditional world, security is a major issues even for the companies who are well known and at a really big scale like Uber. Hackers are always one step further from those who work as cyber security engineers.
In the crypto space, this is way more sensitive. Blockchain technology is relatively new, most of the founders are learning as they go and hacks like this have been pretty common. This is definitely a concern as it gives the wrong message (for the right reasons) to those who are somewhat interested in the space but have not taken the step further due to security concerns. All those teams who are involved in the space should pay special attention to cyber security measures before launching anything.
This will definitely have a bad impact in the web3 space. Keep in mind that Wintermute was one of the largest market makers in the crypto space that offered liquidity to crypto exchanges like Coinbase and Binance.
