KyberSwap, one of the decentralized exchanges behind the altcoin KNC, came to the fore with a shocking development. KyberSwap fell victim to a major security breach that resulted in a staggering $48 million exploit from its Elastic Pools liquidity solution. Here are the details…
Critical abuse in altcoin project
The breach, first detected by a user named Spreek on the X platform, was critical. Because it resonated in the decentralized finance (DeFi) environment. Thus, it sparked immediate reactions and deep concerns within the crypto community. The breach emerged as a significant movement of funds from KyberSwap-related wallets to a single wallet across multiple networks. The funds exploited amounted to approximately $20.7 million from Arbitrum, $15.3 million from Optimism, $7.45 million from Ethereum, $2.8 million from Polygon, and $2 million from Base.
Specifically, the seized assets were predominantly in various forms of Ethereum, wrapped tokens, liquid stake tokens, Arbitrum (ARB) and various stablecoins. Elastic Pools, a distinctive feature of KyberSwap that allows liquidity providers to select preferred price ranges and automatically compound returns, served as a primary target for this exploit. Responding quickly to the breach, KyberSwap published an advisory on X, urging users to immediately withdraw their funds. The explanation was as follows:
To all KyberSwap Elastic Users,
Unfortunately, a security incident has impacted KyberSwap Elastic. As a precaution, we strongly advise users to withdraw their funds quickly. Our team is actively investigating and is committed to providing regular updates. Thank you for your cooperation and understanding during this difficult time.
— Kyber Network (@KyberNetwork) November 23, 2023
Huge drop in KNC price and TVL
KyberSwap’s response underscores the seriousness of the situation and emphasizes the importance of users protecting their assets. As the investigation progresses, the community expects more details about the scope and consequences of this breach. Prices for the Kyber Network Crystal KNC altcoin project briefly dropped 7% after news of the exploit emerged, but have since recovered to trade at $0.74.
But total value locked (TVL) has taken a bigger hit. TVL dropped by 68% within a few hours. Almost $78 million left the protocol as users withdrew money upon news of the attack. The team detected a security vulnerability in April and advised users to withdraw liquidity. However, there was no loss of funds in this incident. This security breach is a stark reminder of the risks that are always present in the cryptocurrency space. Thus, it highlights the need for constant vigilance and robust security measures to protect the evolving DeFi ecosystem.
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