Decentralized lending protocol Exactly suffered an exploit on Friday, becoming the latest DeFi bridge hack victim.
The platform confirmed it was investigating a security issue and had paused transactions. Cybersecurity firms reported that over $7 million worth of Ethereum was stolen by exploiting Exactly's smart contracts.
Ongoing Bridge Vulnerabilities
Exactly operates on the Optimism Ethereum scaling network. Its bridge functionality appears to have been the vector of attack.
Bridges have proven a major target for hackers given the significant liquidity locked for cross-chain transactions. Newer protocols also often have undetected vulnerabilities.
2022 saw record hack volumes, including major bridge exploits like the $326 million Wormhole hack and $552 million Ronin bridge hack.
Impact and Response
Exactly held over $36 million total value locked before the hack according to DeFi Llama. This amount has since dropped to around $10 million as users withdrew funds.
The project is still investigating the details and has not yet disclosed a remediation plan. It did confirm users can still withdraw any remaining assets.
To protect users, Exactly paused transactions and withdrawals. Other protocols have taken more extreme measures like forking to recover funds.
But exploitable flaws continue plaguing projects, particularly in complex bridge code. More rigorous auditing and bug bounties could help discover issues pre-launch.
post-hack strategies also matter, like covering user losses through insurance funds. Overall, the recurrent exploits highlight that nascent DeFi still involves substantial risk.
How Can DeFi Protocols Better Secure User Funds?
- Comprehensive smart contract audits before launch
- Ongoing audits and penetration testing post-launch
- Bug bounty programs incentivizing white hat hacking
- Insurance funds to cover user losses in case of exploits
- Security-focused development culture and best practices
DeFi teams must prioritize security and demonstrate protections to earn user trust. No single solution is perfect, but layered defenses can mitigate risks.
Will DeFi Hacks Continue Without Greater Oversight?
Absent regulation, DeFi teams alone decide security standards. But not all have expertise to secure complex protocols.
Self-regulation could establish security benchmarks and auditing requirements. However, many favor maintaining decentralization without formal oversight.
Ultimately, users must exercise caution and skepticism when funds are at risk. But better education and industry transparency around risks could empower smarter participation.
In summary, the Exactly hack follows an alarming DeFi hacking trend. Though regulation faces resistance, protocols may need to collectively self-impose basic security standards to prevent recurrent exploits. Until then, users should remain wary of unaudited projects with unproven protectons.