Briefing
The KyberSwap Elastic decentralized exchange protocol was subjected to a highly sophisticated multi-chain attack that compromised its core concentrated liquidity pools, resulting in a significant loss of user assets. The primary consequence was the unauthorized extraction of funds by manipulating the pool’s internal state, immediately halting all trading and liquidity provision across multiple deployments. This incident leveraged a critical logic flaw in the swap function’s price and tick-tracking mechanism, specifically a precision error that led to an erroneous “double liquidity counting” during cross-tick operations. The total quantified value of affected assets across five major blockchains, including Arbitrum and Optimism, is estimated at $56,197,284.26.
Context
The prevailing attack surface for complex Automated Market Maker (AMM) protocols remains centered on the intricate logic of concentrated liquidity, where the management of price “ticks” and state variables is highly vulnerable to manipulation. Before this incident, the known risk factor was the potential for reentrancy or logic bypasses in functions that handle both external calls and internal state updates, especially in unaudited or custom code implementations. The inherent complexity of KyberSwap Elastic’s design, which incorporated a unique Reinvestment Curve, created a larger, more opaque attack vector susceptible to precision errors that could corrupt the pool’s financial state.
Analysis
The attacker compromised the smart contract logic by executing a precision-based state manipulation within the concentrated liquidity pool’s swap function. The specific system compromised was the internal calculation of available liquidity, which failed to correctly account for compounded fees and price boundaries. The chain of cause and effect began with the attacker securing a flash loan to execute a pre-calculated swap, deliberately directing the price to a low-liquidity area.
This action triggered a rounding error that caused the pool’s state to register a much higher liquidity amount than was actually present → the “double liquidity counting” flaw. This erroneous state was then exploited in a subsequent swap to extract assets far exceeding the correct output amount, successfully draining the pools across all affected chains.
Parameters
- Total Affected Assets → $56,197,284.26 → The confirmed value of assets extracted and locked across all exploited pools.
- Affected Chains → 5+ → Number of major blockchains impacted, including Arbitrum, Optimism, Ethereum, Polygon, and Avalanche.
- Vulnerability Root Cause → Logic Flaw → A precision error in the concentrated liquidity tick-tracking and liquidity calculation mechanism.
- Attack Method → Flash Loan Exploitation → Used to secure capital and manipulate the pool’s price state to trigger the underlying logic flaw.
Outlook
Immediate mitigation requires all users to revoke token approvals for the KyberSwap Elastic contracts across all affected chains to neutralize any potential secondary risks from the compromised addresses. The second-order effect is a mandatory, immediate re-audit for all concentrated liquidity AMMs utilizing custom tick or state-management logic, as this incident confirms the high contagion risk of precision errors in complex DeFi primitives. This event will establish a new, non-negotiable security best practice requiring formal verification and rigorous boundary-condition testing for all core financial calculation functions within decentralized exchanges.
