Details of the $4.5 million hack that hit cryptocurrency custodian Radiant Capital

Introduction

In a recent setback for the crypto and decentralized finance (DeFi) community, Radiant Capital, a prominent player in the space, fell victim to a hack involving its newly launched native USDC market on the Arbitrum network. PeckShield, a leading blockchain security and analytics company, revealed that approximately 1,900 ETH, equivalent to $4.5 million, was compromised in the cross-chain lending protocol operated by Radiant Capital.

The Flash Loan Assault

The incident, characterized as a flash loan assault, exploited a vulnerability in the lending market. PeckShield reported that the attack occurred a mere six seconds after the market’s launch, taking advantage of the window that often accompanies the introduction of new markets in the lending industry. The modus operandi was reminiscent of well-known platforms like Compound and Aave.

A flash loan attack is a form of exploit wherein bad actors utilize flash loan features to manipulate markets or exploit vulnerabilities in smart contracts. This strategy enables them to borrow assets without collateral, relying on the repayment of the borrowed amount in the same transaction.

The Cryptocurrency Industry Landscape

As of the latest data, the overall market cap of cryptocurrencies stands at an impressive $1.685 trillion. However, the industry has faced significant challenges, with reports indicating losses totaling $1.5 billion due to hacks and frauds up to September 2023. The escalating security concerns have become a focal point within the crypto community.

Radiant Capital’s Response

Radiant Capital, upon discovering the security breach, acted swiftly. The Radiant DAO Council, comprising members of the Web 3 security community and developers, promptly halted the lending and borrowing markets on Arbitrum. The company assured its users that no funds are currently at risk.

In a public statement, Radiant Capital acknowledged the issue with its native USDC market on Arbitrum and emphasized that the matter is under investigation. Once the incident is fully resolved, the Radiant DAO Council plans to release a comprehensive postmortem report. Normal protocol operations on Arbitrum will resume following the conclusion of the investigation.

Industry Trends: A Larger Pattern

This security incident adds to a concerning trend of crypto attacks within the DeFi sector. Notably, the breach at Orbit Chain’s bridging service, Orbit Bridge, led to a substantial loss of $82 million on December 31. The frequency and magnitude of such incidents underscore the urgent need for enhanced security measures within the cryptocurrency ecosystem.

In conclusion, the crypto community must remain vigilant as security threats persist. Radiant Capital’s experience serves as a reminder that robust security protocols and proactive responses are crucial to safeguarding the integrity of DeFi platforms. As the industry continues to evolve, addressing vulnerabilities and implementing advanced security measures will be paramount to its sustained growth.

Featured image source: iStock

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