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A pair of crypto hacks that totaled nearly $200 million in losses and likely affected more than 10,000 users have sparked concern in an industry already reeling from falling prices.
On Wednesday, Solana, a popular blockchain and token, said that some wallets that hold its assets have been breached. At least 7,700 such wallets are believed to have been affected, the company said, while London-based blockchain analytics firm Elliptic put the stolen amount at $5.2 million in crypto, which includes Solana tokens and a stablecoin known as USD.
“An exploit allowed a malicious actor to siphon funds from a number of Solana wallets,” the company said via Twitter. “Engineers are currently working with multiple security researchers and ecosystem teams to identify the root cause of the exploit, which is currently unknown.”
The hack is believed to have affected wallets such as Slope and Phantom. These are “hot wallets” — that is, wallets that allow lightning-fast transactions because they are always connected to the Internet, unlike “cold wallets” that usually require a USB drive and have long downtimes. Solana — which at one time had the fifth most popular token before the slide — has made a name for itself as a blockchain that can transfer funds extremely quickly.
The news follows Monday’s revelation by Nomad, the so-called blockchain bridge, which admitted that around $190 million was taken from it after a hacker breached its system. The attack was known as a “free-for-all” because the hacker’s original code allowed anyone to copy it and steal crypto for themselves. It is not known where the money went.
Nomad said its executives were working with law enforcement and a blockchain data firm called TRM Labs to locate the funds, with no update as of Wednesday afternoon. It said they were working on an “investigation/remediation” as well as “technical fixes.”
In an unusual move, the company early Wednesday provided an address for anyone who might have chosen to grab the money in a noble act of protection.
“Dear white hat hackers and ethical researcher friends who protect ETH/ERC-20 tokens, please send the funds to the following ethereum wallet address,” said Twitter. It is not known if any good Samaritans accepted the company’s offer.
A blockchain bridge allows users to exchange crypto from one blockchain to another—say, from bitcoin to ethereum—making it vulnerable to what security experts call “both sides,” blockchain weaknesses. These bridges also tend to be newer and in some cases more hastily designed. In March, another blockchain bridge known as Ronin was hacked for a total of over $600 million in crypto.
“To date, approximately $1.8 billion has been stolen from these services, and it is alarming that their security standards do not appear to match the vast amounts of capital entrusted to them,” said Tom Robinson, co-founder and chief scientist of Elliptic. in an email to The Washington Post, referring to bridges.
Meanwhile, the Solana case caused concern because it was made vulnerable by factors beyond its control. While some argue that the hack doesn’t indicate that any of the industry’s fundamentals are shaky — “It wasn’t a major problem with the blockchain, it probably looks like an app that someone built is buggy,” crypto mogul Sam Bankman-Fried told Fortune on Wednesday — that highlighted to critics the interconnectedness of crypto networks and the inability of any one part to fully verify all others.
While the hacks involve individual entities, blockchain bridges and hot wallets also highlight what many crypto enthusiasts say is so appealing about the form: ease of use. The first allows different blockchains to communicate—potentially as important to the coming tech era as, say, the ability for people with AT&T and Verizon phone plans to talk to each other in the past.
And cold storage, while safer, seems to undermine what lies at the heart of crypto’s appeal, which is to allow transfers without the delays and waits of traditional bank transactions.
On social media on Wednesday, many showed images of their wallets showing suddenly zero balances, while others questioned hot wallets. “So you’re telling me that storing my entire net worth in a Google Chrome extension would be considered a bad move?” one wag wrote on Phantom.
But experts say the problem may be more serious than that. Finding solutions, they note, may mean making sacrifices within the goals envisioned by crypto idealists.
“One of the benefits of opening up the banking system in this way is the speed and lower barrier to transactions,” said William Callahan III, a former special agent with the Drug Enforcement Administration who now serves as director of government and strategic affairs for a company , called the Blockchain Intelligence Group. “But what these hacks show is that we need to take a step back and question this idea of accessibility, because speed is also part of the problem.” We have to balance speed with security.”
Still, Callahan said he believes such strengthening is possible. “Blockchain bridges need to improve their security, while perhaps users need to use more cold storage,” he added.
The need for speed may be waning on its own as some people leave cryptocurrency. Bitcoin, a strong barometer of crypto activity, has lost 50 percent of its value in 2022 as investors dumped the asset, although it has seen a recovery from below $19,000 in June to around $23,000 in recent weeks.
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