Last week, ethical hackers intervened and helped slow down the hacking attack on Nomad and Solana and returned the lost funds as well.
Hackers are a pain in the neck for crypto projects and the digital asset industry in general. In the first half of 2022 alone, more than $2 billion have been lost to crypto hacks and breaches, according to data from the US-based cyber security firm CertiK. It's not like crypto projects ignore security; it's just that every time they fix a loophole, it seems like another one is exploited on a different project.
Ironically, the hacking community itself (white hat hackers, to be more specific) is coming to the rescue of projects and thwarting attacks. In a way, it's like fighting fire with fire, and these efforts have proven to be effective over time. Let's look at last week's Nomad and Solana attacks and see how these ethical hackers helped slow attacks and return lost funds.
The Solana Attack
On August 3, nearly 8,000 Solana wallets were drained of SOL and other cryptocurrencies, resulting in an $8 million loss for users. It is believed that hackers were able to exploit a flaw in certain wallet software through which they were able to compromise private keys. Armed with the private keys, they were able to syphon funds into four different wallets.
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However, a handful of developers and security officers decided to take things into their own hands. They began initiating malformed transaction scripts to the attacker's wallets to "write-lock" their accounts. Michael Hubbard, the co-founder and managing director of Solana, explained that transactions changing the balance or altering a Solana account in any way would put a brief a "write-lock" on that account.
This script was sent to hundreds of users who began spamming the hackers with the malformed transactions. The resulting slowdown of the hacker's system was similar to a DDoS attack, where bad actors aim to flood servers with traffic to prevent users from accessing online services and sites.
The strategy worked. According to SolBlaze, the pseudonymous founder of Solana, roughly 300 wallets were breached in the hour these spam bots were running, as opposed to the 2,000-odd per hour before that.
However, while this slowed down the hackers, it also caused RPC servers (which facilitate network traffic) to crash. Fortunately, services were quickly restored after Anatoly Yakovenko, the co-founder of Solana, created a walk-around patch to bypass the issue.
Nomad is a bridge protocol that allows users to transfer digital assets between various blockchains, such as Ethereum (ETH), Avalanche (AVAX), etc. On June 6, Quantstamp, a leading blockchain security firm, highlighted a vulnerability in Nomad's protocol. However, this vulnerability was deemed "Low Risk," according to research by Paul Hoffman of BestBrokers.
Bad actors discovered the vulnerability and used it to orchestrate an exploit on the bridge protocol. After the initial exploit was discovered, several users copied the transactions and made away with $190 million. However, not all of the looters had bad intentions. Several white hat hackers syphoned off funds to guarantee they were safely returned.
Nomad has tweeted a wallet key for such hackers to deposit funds, providing them with a 10 percent reward on the returned amount. According to reports, nearly $36 million have been recovered so far. Further, Nomad has partnered with TRM Labs, a digital asset security and compliance firm, to trace the black hat hackers behind the exploit and ensure "consequences for these actors".
White hat hackers play a critical role in the security of the cryptosphere. In February, ethical hacker Jay Freeman prevented a potential $750 million vulnerability from being exploited on Ethereum layer-2 networks. White hat hackers also participate in regular bug bounty programs, weeding out security glitches in exchange for some rewards. This helps networks fool-proof their protocols and keep them (relatively) safe from bad actors.