Following a tumultuous year for decentralized finance (DeFi) projects, many liquidity providers and automated market makers (AMMs) are looking for solutions to address the growing menace of cyberattacks.
Generalized AMM protocol Balancer Labs, which previously lost $500,000 worth of tokens through a security breach, has opened the floor for ethical hackers to test its newly released V2 single-vault security protocol.
$2 Million For The Best Hacker
Balance Labs is looking to secure its network from malicious attacks with what it has termed the “biggest bug bounty” in DeFi’s history.
According to the non-custodial portfolio manager, it will be giving away 1,000 ETH or $2 million to any white-hat hacker that discovers vulnerabilities within its V2 smart contracts vault.
The DeFi protocol said that this prize is meant to reward ethical hackers who can discover backdoors through which malicious actors may infiltrate its newly launched V2 smart contracts architecture.
This open-source platform is scheduled to be available on the testnet starting on Tuesday.
According to the bug bounty website, these vulnerabilities are classified into critical, high, medium, and low, with critical vulnerabilities receiving the top prize of 1,000 ETH. Solutions for low-level defects will only attract 5 ETH or $10,000.
It also went further to state that critical vulnerabilities lead to the draining of investor funds from the vault or permanent locking of these funds in the vault.
High exposures would prompt severe rounding errors where a bad actor can steal funds over any gas costs or swap fees, while medium defects would be minor rounding errors that allow an attacker to gradually doctor balances to their advantage.
Low-level vulnerabilities are those that are mainly information and code quality-based disclosures. The liquidity provider also stated that vulnerabilities previously discovered during formal audits would not be eligible for the rewards.
Speaking on the latest development, company CEO Fernando Martinelli noted that the bug bounty program is meant to build a developer community that will help to create a better Balancer platform for all investors.
DeFi Security Breaches Growing Unchecked
In a report published by blockchain analytics firm CipherTrace in November 2020, in the first half of 2020, DeFi projects were major targets of criminals with a 45% success rate.
This saw over $51.5 million lost to cyber criminals during the period. In the closing months of 2020, DeFi hacks rose to 50%, with the affected crypto projects losing over $47.7 million in the process.
It also said that DeFi hacks made up 21% of all crypto-related crimes. This, according to the document, is because cryptocurrencies have continued to boom as more investors are coming into the crypto space.
And this has not ceased even with the growing prosecution of crypto criminals. In a statement posted last month, decentralized exchange platform DODO DEX said that it lost $3.8 million to a cyberattack. Even though the company has said it expects $1.88 million to be recovered, crypto thefts have continued to boom unhindered.