Feb 20, 2023

Platypus Working on Compensation Plan After $8.5M Flash Loan Attack

Decentralized finance (DeFi) firm Platypus has been hit hard by a flash loan attack that drained nearly $8.5 million from the protocol, affecting its stablecoin dollar-peg. The firm is now working on a compensation plan for users’ losses and has asked users to not realize their losses in the protocol, as this would make it harder for the company to manage the issue.

Platypus announced the news in a tweet on Feb. 18, adding that asset liquidations have been paused for the time being. The firm also said that different parties, including legal enforcement officials, are currently involved in the funds’ recovery process, and more details about the next steps will be disclosed soon.

Blockchain security firm CertiK first reported the flash loan attack on the platform through a tweet on Feb.16, along with the alleged attacker’s contract address. As a result of the attack, the Platypus USD (USP) stablecoin depegged from the U.S. dollar, dropping to $0.33 at the time of writing.

CertiK noted that the attacker used a flashloan to exploit a logic error in the USP solvency check mechanism in the contract holding the collateral. A potential suspect has been identified.

A technical post-mortem analysis conducted by auditing company Omniscia revealed the attack was made possible by incorrectly placed code after it was audited. The version of the MasterPlatypusV1 contract from Nov. 21 to Dec. 5, 2021, however, “contained no integration points with an external platypusTreasure system” and therefore did not contain the misordered lines of code.

Flash loan attacks are a risk to the security of smart contracts as they allow attackers to borrow large amounts of money without collateral. Once a cryptocurrency asset has been manipulated on one exchange, it is quickly sold on another, allowing the exploiter to profit from the price manipulation.

As a result of this attack, Platypus is now exploring a method to potentially recover the funds, which would require the approval of a recovery proposal in Aave’s governance forum. In addition, the firm is also looking into NFT marketing and promotion strategies to help boost the sale of NFTs and increase user engagement on the platform. Platypus is also considering working with a web3 agency and NFT marketing agency to help with its NFT marketing efforts. The firm is also exploring the use of Twitter NFT marketing to help reach a larger audience and promote the sale of its NFTs.

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