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Poloniex Hack, Create2 Exploitation, and Protecting Your Digital Asset

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2023-11-17
Poloniex Hack, Create2 Exploitation, and Protecting Your Digital Asset

TL;DR

- Poloniex was hacked for $126 million on November 10. Justin Sun said that Poloniex's financial position could cover the losses. The exchange resumed deposits and withdrawals on November 15.

- Hackers have been exploiting Create2, a legitimate code of Ethereum, to bypass security alerts and drain millions of USD from user’s wallets for months.

- In the wake of increasing threats in the crypto world, users need to be mindful of a few practical measures to better protect their digital assets.

Poloniex Was Hacked For $126 Million On November 10

The cryptocurrency community was rocked by a significant security breach at Justin Sun's cryptocurrency exchange, Poloniex, resulting in the unauthorized access and draining of its hot wallets to the tune of $126 million. The heist sent shockwaves through the cryptocurrency community, raising concerns about the overall security of digital assets.

What Happened During the Poloniex Hack?

The attack, which commenced at 10:30 AM UTC, unfolded across multiple blockchains, including Ethereum, TRON, and BTC. The attacker's methodical progression showcased a sophisticated understanding of blockchain ecosystems, enabling them to exploit vulnerabilities on each platform.

The first alarms regarding the security breach were sounded by reputable blockchain security firms, Cyvers and PeckShield, on X (formerly Twitter) at around 10:55 UTC, November 10. Approximately half an hour after the unauthorized transactions began, Poloniex, in response to the escalating situation, notified its users that the wallet had been "disabled for maintenance." This move aimed to mitigate further damage and buy time for a thorough investigation into the breach.

The gravity of the situation was further confirmed when Poloniex investor Justin Sun acknowledged the breach in a tweet. Sun's acknowledgment added weight to the severity of the incident, signaling a unified front in addressing the crisis.

The Aftermath of the Poloniex Hack

In the aftermath of the attack, Poloniex remained steadfast in its commitment to its users. The exchange initiated a whitehat bounty, engaged with the crypto community, and collaborated with security auditing firms to assess and bolster its security measures. Facing adversity head-on, Poloniex took proactive measures by offering a whitehat bounty of 5%, encouraging the perpetrators to return the fund. Additionally, Arkham's on-chain intel market offered a $4000 bounty for information leading to the identification of the hacker. These collective efforts showcased the community's resilience and commitment to mitigating the impact of the breach.

Justin Sun also took to X to assure users that Poloniex's financial position could cover the losses, providing a sense of stability amid the crisis.

The consequences of the hack extended beyond the immediate financial losses, influencing token prices in the market. Notably, the Poloniex hacker strategically purchased $20 million worth of TRON token (TRX), causing a significant surge in the token's price. The intricate financial maneuvers highlighted the interconnected nature of the crypto landscape.

Poloniex Resuming Deposits and Withdrawals on November 15

Poloniex announced the restoration of deposit and withdrawal services on November 15, 2023. The platform reported that restoration efforts were mostly completed, and the platform was operating smoothly. To enhance fund security, Poloniex said that it enlisted a top-tier security auditing firm without revealing what firm it was, and that ongoing evaluation processes were expected to take several more days.

Exploiting Create2 on Ethereum: The Code Behind Crypto Heists

Besides the hacks often associated with the exchange, cryptocurrency enthusiasts were recently confronted with a new threat. A piece of code called Create2, initially designed for legitimate purposes within the Ethereum network, has been taken advantage of by hackers to execute a series of sophisticated attacks, revealing vulnerabilities that extend beyond individual platforms.

Introduction to Create2 and its Legitimate Purpose in the Ethereum Network

Create2 was originally created with a legitimate purpose: to predict the address of a contract before it is deployed on Ethereum. This functionality serves various constructive purposes, such as aiding platforms like Uniswap in efficiently managing and deploying contracts. However, in the wrong hands, this seemingly innocuous piece of code has become a weapon of choice for malicious actors.

Misuse of Create2 by Hackers to Bypass Security Alerts

Hackers, with a keen understanding of the Ethereum ecosystem, have exploited Create2 to bypass security alerts effectively. They would create temporary wallet addresses to receive funds after a user clicks on a seemingly innocent but malicious signature. Typically, users are prompted to "approve" a signature when interacting with a smart contract or sending funds. The attackers, cunningly disguising permissions within this signature, gain unauthorized access to a user's wallet. Create2's exploitation allows hackers to execute malicious signatures without triggering the security alerts that would typically warn users. After gaining access to private keys of the user’s wallet, the perpetrators can make transactions without being detected. This methodical approach has enabled them to siphon significant amounts of cryptocurrency undetected for an extended period.

ScamSniffer and SlowMist have conducted extensive research on the extent of the theft facilitated by Create2 exploitation. Their findings reveal a staggering figure: more than $60 million has been stolen in the past six months alone. This equates to a total of more than 99,000 victims falling prey to the hackers' ingenious use of Create2, highlighting the scope and severity of the issue.

Impact on the Crypto Community and Broader Implications of Code Exploitation

The repercussions of Create2 exploitation extend far beyond individual victims and platforms. The broader crypto community now grapples with the realization that even well-established codes within blockchain networks can be repurposed for malicious intent. The incident is a wake-up call for both developers and users to reassess and reinforce security measures in an ever-evolving digital landscape.

The revelation of Create2's exploitation underscores the need for constant vigilance and proactive security measures within the cryptocurrency space. As the community collectively struggles with the aftermath of these code-based attacks, the implications reach beyond immediate financial losses, prompting a reassessment of the foundational security infrastructure supporting blockchain networks.

Practical Measures to Protect Your Digital Assets in the Face of Crypto Threats

As the cryptocurrency landscape becomes more intricate, recent incidents, such as the Poloniex hack and the exploitation of the Create2 code, underscore the critical need for users to adopt robust security measures. Protecting your digital assets in this vulnerable environment requires a multi-faceted approach that combines awareness, technology, and proactive engagement.

1. Understanding and Monitoring Signature Approvals

One of the fundamental steps in protecting your digital assets is to understand and closely monitor signature approvals. Be vigilant when interacting with smart contracts or executing transactions, especially when prompted to "approve" a signature. Regularly review and verify transaction details, ensuring they align with your intentions. This heightened awareness can act as an initial line of defense against unauthorized access to your assets.

2. Utilizing Hardware Wallets for Enhanced Security

Consider upgrading your security infrastructure by opting for hardware wallets. Unlike online wallets or software solutions, hardware wallets store your private keys offline, providing an additional layer of protection against hacking attempts. These physical devices are less susceptible to remote cyber threats, making them a secure choice for storing substantial amounts of cryptocurrency.

3. Educating Users on Potential Phishing and Fraud Attempts

Empower yourself with knowledge to recognize and thwart potential phishing and fraud attempts. Be cautious of unsolicited emails, messages, or social media communications that request sensitive information or encourage immediate actions. Legitimate entities will not ask for your private keys or personal information. By staying informed, you can confidently navigate the crypto space and shield yourself from fraudulent schemes.

If you're new to the market, don’t fret. Bitget provides an array of informative articles to quickly acquaint you with the essentials and keep you alert to potential scams.

An Advanced Security Guide on Bitget

Common Cryptocurrency Scams and Frauds

Bitget's Ultimate Shield: Your Guide to Defeating Phishing Scams

4. Regularly Updating and Patching Software Vulnerabilities

Maintaining the security of your digital assets involves actively managing the software you use. Regularly update your wallets, exchange platforms, and any other crypto-related applications to ensure you benefit from the latest security patches. Outdated software may contain vulnerabilities that hackers can exploit, making proactive updates an essential aspect of a robust security regimen.

5. Only Doing Transactions with Trusted Exchanges

Exercise caution when selecting cryptocurrency exchanges for your transactions. Opt for platforms that prioritize user security and transparency. Bitget, for instance, outperforms industry standards by providing strong proof of reserves with a ratio of 199%, verifiable through a Merkle Tree proof. Additionally, the platform offers a $300 million Protection Fund, acting as a solid shield against potential asset losses for users. Choose exchanges with proven track records, transparent security measures, and proactive initiatives to safeguard your funds.

6. General Best Practices for Users in the Crypto Market

As the cryptocurrency ecosystem matures, it’s essential that users adhere to general best practices. Create strong, unique passwords for your accounts, enable two-factor authentication wherever possible, and consider using dedicated devices for your crypto activities. Regularly review your financial statements and account activities to promptly identify and address any suspicious transactions. Follow the official websites and channels of the projects and exchanges you use to be aware of their latest news and updates. By incorporating these practices into your routine, you contribute to the overall resilience of the crypto community against emerging threats.

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Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.