Hundred Finance Suffers $7.4 Million Flash Loan and Precision Loss Exploit ∞ Security

A mesmerizing blue liquid, rich with effervescent bubbles, dynamically swirls within a sleek, multi-layered structure composed of metallic silver and deep navy blue rings. At its core, a luminous, reflective blue orb gleams, anchoring the fluid motion

The image showcases a central metallic apparatus composed of stacked, polished rings, from which intricate blue crystalline structures emanate and intertwine. These translucent, faceted blue forms are textured with a fine, granular, or frothy surface, suggesting dynamic movement and aggregation

Briefing

On April 15, 2023, the Hundred Finance lending protocol on the Optimism blockchain was subjected to a sophisticated flash loan attack, resulting in a loss of approximately $7.4 million. This incident leveraged a critical vulnerability stemming from exchange rate manipulation within the hWBTC contract, exacerbated by a rounding error in the redeemUnderlying function and the presence of empty markets. The exploit allowed the attacker to disproportionately inflate the value of hTokens, enabling massive, unauthorized borrowing against minimal collateral. The total financial impact of this event stands at $7.4 million, underscoring the systemic risks associated with precision loss in DeFi protocols.

Intricate metallic components, akin to precision-engineered shafts and gears, are immersed and surrounded by a vibrant, translucent blue liquid against a soft grey background. This composition visually interprets the complex blockchain architecture and its underlying cryptographic primitives

Context

Prior to this incident, the DeFi ecosystem, particularly lending protocols forked from established codebases like Compound V2, faced inherent risks from complex smart contract interactions and potential for precision-related vulnerabilities. While Compound V2 itself had undergone audits, the re-deployment of its codebase in various forks often introduced new attack surfaces, especially in markets with low liquidity. The prevailing security posture often underestimated the impact of rounding errors when combined with flash loan capabilities and empty market conditions, leaving protocols susceptible to exchange rate manipulation.

Central to the image is a metallic core flanked by translucent blue, geometric components, all surrounded by a vibrant, frothy white substance. These elements combine to depict an intricate digital process

Analysis

The attack on Hundred Finance exploited a multi-faceted vulnerability within its hWBTC contract, a fork of Compound V2. The core mechanism involved the attacker utilizing a flash loan to acquire a substantial amount of Wrapped Bitcoin (WBTC). This WBTC was then strategically deposited into an empty hWBTC market, establishing the attacker as the sole hWBTC holder.

By subsequently “donating” a portion of the WBTC to the contract and exploiting a rounding error in the redeemUnderlying function, the attacker drastically manipulated the hWBTC exchange rate. This inflated rate allowed the attacker to borrow a disproportionately large amount of Ether with minimal hWBTC, effectively draining the protocol’s liquidity before repaying the initial flash loan.

A sleek, modular white structure, resembling a sophisticated decentralized protocol, rests partially submerged in luminous blue water. A powerful stream of water, indicative of digital assets, actively gushes from its core conduit, creating dynamic splashes and ripples

Parameters

Protocol Targeted ∞ Hundred Finance
Attack Vector ∞ Flash Loan, Exchange Rate Manipulation, Precision Loss
Financial Impact ∞ $7.4 Million
Blockchain Affected ∞ Optimism (Ethereum Layer-2)
Vulnerability Type ∞ Rounding Error in redeemUnderlying function, Empty Market Exploitation
Date of Incident ∞ April 15, 2023

A close-up view reveals a complex, futuristic apparatus featuring prominent transparent blue rings at its core, surrounded by dark metallic and silver-toned components. A white, textured material resembling frost or fibrous netting partially covers parts of the structure, particularly on the right and lower left

Outlook

Immediate mitigation for users involved with similar Compound V2 forks should include verifying protocol liquidity and the presence of robust oracle systems that prevent exchange rate manipulation. This incident highlights the critical need for comprehensive security audits that specifically address precision loss, especially in low-liquidity markets and across all contract functions, not just the primary logic. Furthermore, it reinforces the importance of continuous monitoring for anomalous exchange rate fluctuations and rapid response mechanisms to pause vulnerable markets. The broader implication is a heightened awareness for all DeFi protocols to implement circuit breakers and dynamic risk parameters that adapt to market conditions and prevent flash loan-enabled exploits.

The Hundred Finance exploit serves as a stark reminder that even well-audited codebases, when forked and deployed under specific market conditions, can harbor critical vulnerabilities, demanding continuous vigilance and adaptive security measures across the DeFi landscape.

Signal Acquired from ∞ ImmuneBytes