• White Hat’s heroics saved Ethereum-based dYdX from a $2 million security breach

  • Some of the major benefits that have seen decentralized exchanges (DEXs) skyrocket in popularity in recent history are security-enhanced privacy and personal monetary sovereignty. Unfortunately, using DEX poses its own set of security risks.

    dYdX enters the fray

    Today, the decentralized crypto-exchange dYdX is hot, but not for the right reasons. It is a non-custodial decentralized exchange that enables users to leverage trades through Ethereum smart contracts. Its daily trading volume on the platform recently increased to nearly $10 billion, surpassing Coinbase and Uniswap.

    However, one development may have an impact on this impressive surge. The protocol is making headlines today because it fixed a security flaw before it could be exploited. In a series of tweets, the team addressed the issue.

    The dYdX team notified the public of a security issue with a newly deployed smart contract. According to one of the aforementioned tweets,

    At 05:21 UTC today the dYdX team was alerted of a security issue with a newly deployed smart contract❗If you have set allowance to deposit to https://t.co/1WbZbCpiuX since Wednesday 11/24 read for important recovery information❗NO FUNDS WERE LOST AND ALL FUNDS ARE SAFE 🔒— dYdX 🦔 (@dydxprotocol) November 27, 2021

    Meanwhile, the team issued a warning to users, stating,

    “All users who have set allowance to deposit since Wednesday, November 24th, are advised to visit the exchange as soon as possible to recover the funds.” Your funds are not at risk, but they must be returned to your wallet.”

    The white hat recovery was carried out in collaboration with a man named Samczsun and the dYdX team, and all potentially vulnerable funds were saved as a result.

    Concerning the affected funds, 700 accounts (approximately $2M) were diverted to an escrow smart contract as part of the white hat recovery. Accounts that were not deposited to dYdX were included in this category. Nonetheless, in order to maintain security, only the user’s wallet had access to the funds to be recovered.

    “No funds were lost.”

    The protocol’s executives also advised users (who set a deposit allowance) to avoid transferring funds until the team requested it.

    Once you have completed the recovery steps at https://t.co/1WbZbCpiuX, your wallet is safe and can be used again ✅— dYdX 🦔 (@dydxprotocol) November 27, 2021

    Other users who did not set up a deposit allowance for the dYdX Layer 2 Perpetuals product were unaffected by the aforementioned developments.

    Meanwhile, gas-free deposits and the 0x swap integration have been disabled until further notice. According to the team’s conclusion,

    “A longer tweet with additional information will be issued shortly after affected users have had a chance to recover.” Soon after, a full incident report will be made public.”

    “A longer tweet with additional information will be issued shortly after affected users have had a chance to recover.” Soon after, a full incident report will be made public.”

    Earlier in August, a similar impact on the alt’s price was observed.

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