Karma Strikes Back: BSC Hacker Loses $53 Million in a DeFi Liquidation

The crypto market is full of surprises and risks. Sometimes, a sudden price drop can wipe out millions of dollars in a matter of minutes. This is what happened to a hacker who stole almost $600 million worth of BNB tokens from the Binance Smart Chain (BSC) bridge last October. The hacker had used the stolen tokens as collateral for a loan on a decentralized lending platform, but when the market crashed on August 18, 2023, the hacker’s position was liquidated and he lost over $53 million.

What is Binance Smart Chain (BSC)?

Binance Smart Chain (BSC) is a blockchain network that runs parallel to the Binance Chain, the home of the Binance DEX. BSC is compatible with the Ethereum Virtual Machine (EVM), which means it can run smart contracts and decentralized applications (dApps) that are also compatible with Ethereum. BSC also supports the BEP-20 token standard, which is similar to the ERC-20 standard on Ethereum.

BSC aims to provide a fast, cheap, and scalable platform for developers and users who want to access the benefits of decentralized finance (DeFi). DeFi is a term that refers to various financial services that are built on top of blockchain technology, such as lending, borrowing, trading, investing, and more. DeFi allows users to have more control over their own money and assets, without relying on intermediaries or centralized institutions.

Some of the popular dApps on BSC include PancakeSwap, Venus, BakerySwap, ApeSwap, and many more. These dApps allow users to swap tokens, provide liquidity, earn interest, borrow money, stake tokens, and collect non-fungible tokens (NFTs). NFTs are unique digital assets that can represent anything from art to music to gaming items.

How did the hacker exploit the BSC bridge?

The BSC bridge is a service that allows users to transfer tokens between different blockchains, such as Binance Chain, BSC, and Ethereum. The bridge uses smart contracts to lock and unlock tokens on each chain, ensuring that the total supply of each token remains unchanged.

However, on October 6, 2020, the bridge was suspended due to an exploit that allowed the hacker to mint 2 million BNB tokens out of thin air. The hacker then transferred these tokens to various wallets and dApps on BSC. The total value of the stolen tokens was around $568 million at the time of the theft.

The hacker apparently used some of the stolen tokens as collateral for a $30 million loan of USDT, a stablecoin pegged to the US dollar, on Venus Protocol. Venus Protocol is a decentralized money market platform that allows users to lend and borrow various crypto assets. Users can also use their crypto assets as collateral to borrow other assets or mint synthetic stablecoins called vTokens.

How did the market crash liquidate the hacker?

On August 18, 2023, the crypto market experienced a sharp decline that affected almost all major coins. The total market capitalization dropped by 6%, from $1.2 trillion to $1.1 trillion. The price of BNB also fell by more than 10%, from $231 to $214.

This sudden price drop triggered a liquidation event for the hacker’s position on Venus Protocol. Liquidation is a process that occurs when a borrower’s collateral value falls below a certain threshold, called the liquidation ratio. When this happens, the protocol automatically sells some or all of the borrower’s collateral to repay the loan and charge a penalty fee.
According to blockchain data from PeckShield, a blockchain security firm, three positions linked to the hacker’s wallet were liquidated after BNB’s price fell below $220. The hacker lost 245,000 BNB tokens in total, which were worth more than $53 million at the time of liquidation.

What are the lessons learned from this incident?

This incident shows that hacking is not only illegal but also risky. The hacker may have thought that he could get away with his crime by hiding his tracks and using various dApps on BSC. However, he did not anticipate that the volatile nature of the crypto market could turn against him and cause him to lose a significant portion of his loot.

This incident also highlights the importance of security in DeFi. Users should be careful when using dApps that involve smart contracts and transactions with other parties. They should always do their own research and due diligence before interacting with any dApp or protocol. They should also be aware of the risks involved in DeFi activities, such as price fluctuations, liquidity issues, smart contract bugs, and malicious attacks.

Finally, this incident demonstrates the resilience and innovation of the BSC ecosystem. Despite being targeted by hackers and scammers, BSC continues to grow and attract more developers and users who want to enjoy the benefits of DeFi. BSC also strives to improve its security measures and collaborate with security professionals to prevent and mitigate future attacks.

Conclusion

The BSC hacker who stole $568 million worth of BNB tokens last year lost over $53 million of his ill-gotten gains in a market crash that triggered a liquidation event on Venus Protocol. This shows that hacking is not only immoral but also unprofitable in the long run. It also shows that security is paramount in DeFi and that users should be cautious and responsible when using dApps on BSC. BSC, on the other hand, remains a vibrant and secure platform for DeFi innovation and adoption.

What do you think of this incident? Do you use any dApps on BSC? Share your thoughts and experiences with us in the comments below! 😊

Sources:

• (1) BNB hacker loses over $53M after getting liquidated in market crash | Cointelegraph.
• (2) Liquidation Looms: DeFi Ecosystem Faces Another Bailout with Venus Protocol’s $30M Event | MSN.
• (3) Binance Bridge Hacker Hit By $30M Liquidation On Venus | Yahoo Finance.
• (4) BNB Exploit Hacker Gets $63 Million Liquidated Over Venus Protocol ... | Bloomberg.
• (5) BNB Bridge Hacker Triggers $5.5 Million Partial Liquidation on Venus ... | Coincu.
• (6) BNB USD (BNB-USD) Price History & Historical Data - Yahoo Finance | Yahoo Finance.
• (7) BNB price today, BNB to USD live price, marketcap and chart | CoinMarketCap | CoinMarketCap.
• (8) BNB to INR: BNB Price in Indian Rupee | CoinGecko | CoinGecko.
• (9) BNB Price Index, Live Chart and USD Converter - Binance | Binance.
• (10) A History of Binance Coin (BNB) Price Movements - BeInCrypto | BeInCrypto.
• (11) Security First in BSC & DeFi: Is Binance Smart Chain Safe? | Binance Blog.
• (12) How to Get Started with BNB Smart Chain (BSC) - Binance | Binance Academy.
• (13) Binance Smart Chain Announced Strategic Cooperation with PeckShield | Binance Blog.

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