Market Analysis

Mirror Protocol Halts Exploit After $2M Lost

It appears that the project’s collapse was averted at the last moment.

Key Takeaways

  • Mirror Protocol has stopped an exploit that began yesterday and caused it to lose approximately $2 million.
  • The project disabled has certain affected assets in order to prevent funds from being drained any further.
  • Mirror Protocol may have been minutes from collapse, as pools could have been emptied when markets opened today.

Terra’s Mirror Protocol has resolved an ongoing exploit that caused the network to lose over $2 million yesterday.

Mirror Protocol Disables Affected Pools

An attack on Mirror Protocol began yesterday, May 30, as malfunctioning price oracles allowed attackers to drain funds.

The issue arose from the fact that those oracles mismatched Tera (LUNA) and Terra Classic (LUNC) prices, giving the attacker an opportunity to cheaply obtain the more valuable asset and swap it for other assets used by Mirror Protocol.

Terra community member FatMan wrote on Twitter that the problem has now been resolved, as Mirror Protocol has disabled mBTC, mETH, mDOT and mGLXY as collateral options. Those funds were originally targeted by the attacker during the original exploit.

“The attacker can no longer use his ill-gotten endowment to drain the rest of the pools,” he posted this morning.

Project Was Close to Collapse

It seems that Mirror Protocol was very close to collapsing as a result of the exploit and the funds lost in the process.

Another user, Rizman Zoom, wrote that the affected assets were available at a 97% discount this morning. This meant that Mirror Protocol’s pools could have been rapidly emptied of funds when U.S. markets opened today.

“Mirror Protocol [is] dying today,” Rizman Zoom wrote on Discord. “Unless they suspend mBTC, mETH, mDOT and mGLXY from being used as collateral for minting within the next 25 minutes or so, Mirror Protocol is being exploited to death.”

Shortly before the issue was resolved, FatMan wrote that there were just 16 minutes left before the death of the protocol. That suggests Mirror Protocol was indeed close to failing.

This is the second recent attack on Mirror Protocol. Another attack from October 2021 went unnoticed until last week, when it was found to have cost the protocol $90 million.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.

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