DeFi Madness at bZx — Earned Over 500k USD in Just 30 Minutes
By Marko Vidrih on The Capital
In terms of price, Bitcoin has not changed much in recent weeks. In contrast, some altcoins hit new all-time highs and ran away from BTC.
Altcoins from the DeFi area in particular have been the winners in recent weeks. It is not always about lending, but also about decentralized exchanges where more and more is traded.
Small projects, which cannot afford or want to be listed on large centralized exchanges such as Binance, get their money’s worth. Exactly on such a decentralized exchange, someone managed to earn over half a million USD within half an hour on Monday.
The bZx deal of the year on Uniswap
The entire DeFi field is still fairly new and therefore harbors many risks and opportunities. Today, however, we only talk about opportunities that can arise. Rather, it is a trader who made an incredible trade on the decentralized Exchange Uniswap on Monday.
On Monday, the bZx protocol, which fell victim to a hacker attack twice in a row in February 2020, released its in-house tokens for trading for the first time. The closing date took place on Uniswap and was immediately used by a smart developer.
On Uniswap, trading runs completely decentrally using a protocol. Ultimately, all transactions run via the Ethereum blockchain and can be found in the respective blocks. Before the actual trading, the liquidity pool on Uniswap, which is used to provide the necessary liquidity for the respective trading pair, is filled with tokens. The projects often do this themselves in order to get the trade rolling. So also the bZx protocol.
How did he do it?
In a tweet, Roman Storm, a blockchain security auditor, drew attention to the case for the first time and explained how the clever retailer did it. The man, who is probably an experienced DeFi / Smart Contract developer, has written a Smart Contract that automatically trades on Uniswap. In order to be the first to access the bZx liquidity pool, he overloaded the Ethereum network. With this, the transactions of the other traders did not get through and the trader was able to use the pool without restrictions.
This made him the first to make a trade after the liquidity was made available. He was able to get a large part of the available BZRX tokens at an incredibly low price. A few minutes after the purchase, he started selling the purchased BZRX tokens again via Uniswap. Overall, he used 650 ETH in his trade. After only 30 minutes he went out with 2680 ETH and 300k BZRX tokens. That makes a profit of 2030 ETH and 300k BZRX tokens, which are worth over half a million USD.
DeFi still heavily depends on Ethereum’s performance
This example clearly shows how vulnerable DeFi Space is. However, such incidents will help make it more difficult or even impossible in the future. Again and again experienced smart contract developers manage to find errors in a log in order to access the stored cryptocurrencies.
However, as you can see from this example, there does not even have to be an error in the smart contract. Apparently it is enough to take advantage of the insufficient scalability of Ethereum to prevent all other participants. So one could actually look for the culprit here in Ethereum. This makes it increasingly clear that the move from Ethereum towards proof-of-stake is inevitable.
Author: Marko Vidrih
Featured image credit: Unsplash
