Onyx Protocol’s $3.8 Million Hack: Insider Threats or External Attack?

Onyx Protocol recently suffered a significant exploit, resulting in a loss of $3.8 million.

Hacken, a security auditing firm, investigated the incident, revealing that the attack utilized a malicious contract created shortly before targeting Onyx. The hacker exploited vulnerabilities in the platform to drain its native stablecoin, Virtual USD (VUSD).

This marks the second significant breach for Onyx since November 2023, leading to confusion and further scams on social media. Although Onyx assured users that VUSD remains operational, the incident has disrupted its peg, causing it to drop to $0.39 from its intended value of $1.

The attacker managed to exploit low liquidity in trading pairs by executing a series of transactions, allowing them to withdraw a total of $3.8 million in VUSD. The transactions involved borrowing WETH and creating a series of spam transactions to manipulate the exchange rate.

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Additionally, multiple assets from Onyx were affected during the hack, including significant transfers of VUSD and Onyxcoin (XCN). The incident highlights persistent vulnerabilities in DeFi protocols, particularly those derived from Compound V2, which continue to be exploited despite prior warnings.

Speculation around the attack suggests it could be linked to a rogue insider, possibly even North Korean hackers. This exploit not only raises alarms about security flaws but also about potential insider threats within crypto projects.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.