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The Abracadabra Finance platform was hit with a serious security breach, causing a temporary loss of $7 million. This incident raised concerns as the platform already dealt with significant bad debt. The security breach prompted a decline in the value of its stablecoin, Magic Internet Money (MIM), which dropped to $0.7638. Subsequently, the price has somewhat recovered to $0.949.
Investigation Underway of $7M Hack
The security team at Abracadabra Finance is actively investigating the exploit. According to their statement, the attack appears to be related to specific cauldrons on the Ethereum blockchain. In response to the security incident, the project has announced plans for its DAO treasury to buy back MIM from the market and burn them to recover from the losses.
What happened?
Security analysts from firms like PeckShield and Blocksec have classified the incident as a malicious attack. PeckShield revealed that the attacker was funded through Tornado Cash, a privacy protocol with sanctioned usage. Blocksec, another security firm, suggested that the initial analysis points to an attack on the project’s smart contract. As of their assessment, approximately $29 million in assets remain at risk within the affected contract. While Certrik believes the exploit is linked to the rounding error.
Abracadabra Finance Future Hangs in Balance
Even after fixing the security problem, Abracadabra Finance’s stability remains questioned. The platform, founded by Daniele Sesta, has been known for its involvement in DeFi lending and borrowing tools. Notably, the platform faced challenges in 2022 during the collapse of FTX, leading to fluctuations in the value of MIM.
Earlier in the year, the platform attracted attention due to a proposal suggesting a shift in power from the decentralized Abracadabra DAO to a more centralized entity involving legal professionals and trustees. The recent security incident may exacerbate existing issues and impact the platform’s future.