Cypher Protocol freezes smart contract amid $1m exploit

Cypher Protocol, a decentralized futures exchange on the Solana (SOL) blockchain, has halted its smart contract in the wake of an estimated $1 million exploit.

On Aug. 7, Cypher Protocol announced on X that it had frozen its smart contract following a security incident involving an estimated $1 million exploit.

The team is investigating the cause and has initiated negotiations with the suspected hacker to potentially recover the stolen funds.

Cypher has has experienced an exploit/security incident. The smart contract has been frozen.

The team is currently working with individuals and investigating

To the hacker: We are writing to see whether you would be open to speaking with us about any potential next steps.

— cypher ©️ (@cypher_protocol) August 7, 2023

Data from the Solana blockchain explorer Solscan has revealed that the wallet associated with the exploit stole roughly 38,530 Solana tokens and about $123,180 USDC, amounting to illicit gains of around $1,035,000.

Shortly after the theft, the alleged wallet reportedly transferred 30,000 USDC to Binance’s Solana USDC address “kiing.sol,” suggesting an attempt to cash out the stolen funds.

Crypto researcher Messari confirmed the incident, presenting it as a setback to the Solana blockchain.

This comes after the network managed to increase its total value locked (TVL) by an impressive 15% in July to $310 million, even as other major blockchains such as Ethereum (ETH), Binance Smart Chain (BSC), Arbitrum (ARB), Polygon (MATIC), and Avalanche (AVAX) were recording declines.

Smart contract freezing sparks community backlash

Cypher, known for its rapidly growing popularity on the Solana blockchain and its unique loyalty program, has now faced criticism from its user base for freezing the smart contract, leaving users unable to perform transactions.

The incident has further ignited debate over liquid staking on the Solana blockchain, with critics questioning the security measures in place.

And people wonder why liquid staking on solana is so quiet. Chasing yields and airdrops on shitty protocols. Just not worth it for a few extra %s

— Tippy toes (@Undeniable_kek) August 7, 2023

Nevertheless, some optimists within the industry continue to highlight the network’s achievements, notably in terms of transaction speed and cost.

Negotiations with the alleged hacker are ongoing, with discussions possibly focused on a settlement that would see 90% of the stolen funds returned in exchange for a 10% cut, a scenario reminiscent of the recent Curve DAO (CRV) exploit. Alternatively, the Cypher Protocol could offer a public bounty for information about the exploiter.