Onyx Protocol Suffers $3.8 Million Exploit via NFT Liquidation Contract ∞ Security

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Briefing

The Onyx Protocol, a fork of Compound Finance, experienced a significant security incident resulting in a $3.8 million loss due to a vulnerability within its NFT Liquidation contract. Attackers leveraged this flaw to drain the vUSD stablecoin, subsequently causing its depeg. This event underscores the persistent risks associated with inherited codebases and the complexities of integrating novel components like NFT liquidation mechanisms into established DeFi architectures.

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Context

Prior to this incident, Compound v2 forks have frequently faced exploits stemming from a known vulnerability in newly launched, empty lending markets, susceptible to price manipulation if not managed meticulously. This prevailing attack surface has been a recurring vector across the DeFi ecosystem, enabling attackers to exploit discrepancies in asset valuation. The Onyx exploit initially appeared to be a variant of this known class of vulnerability.

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Analysis

The core of the incident involved a technical flaw residing within Onyx Protocol’s NFT Liquidation contract. While initially suspected as a re-exploitation of a known Compound v2 fork bug, the team clarified that the vulnerability was specifically tied to this NFT-related component. The attacker successfully manipulated asset prices, enabling the unauthorized draining of vUSD stablecoins from the protocol. This chain of events highlights how a specific contract’s logic, when combined with price manipulation, can lead to a direct loss of funds and systemic instability for pegged assets.

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Parameters

Protocol Targeted ∞ Onyx Protocol
Attack Vector ∞ NFT Liquidation Contract Vulnerability and Price Manipulation
Financial Impact ∞ $3.8 Million
Asset Affected ∞ vUSD Stablecoin
Initial Disclosure ∞ September 26, 2024

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Outlook

Immediate mitigation for users involved with Onyx Protocol should focus on understanding the current status of the vUSD stablecoin and any official guidance from the project. For similar protocols, this incident necessitates a rigorous re-evaluation of all newly integrated contract logic, especially those interacting with liquidation mechanisms or price oracles, even within audited base codebases. This exploit reinforces the critical need for comprehensive security audits that extend beyond inherited vulnerabilities to cover novel contract interactions and potential price manipulation vectors.

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Verdict

This incident serves as a stark reminder that even well-established codebase forks require meticulous scrutiny of new integrations, as novel contract interactions can introduce critical, unforeseen attack surfaces within the digital asset security landscape.

Signal Acquired from ∞ protos.com