A group of blockchain bots working to generate revenue through maximal extractable value (MEV) suffered a significant loss of over $25 million due to a highly advanced exploit.
MEV bots function akin to high-frequency traders in the blockchain world. They leverage the speed and intricacies of blockchain technology to seize arbitrage opportunities. However, this often entails exposing large sums of money to market risks in order to manipulate prices to the desired levels.
On April 3, specific MEV bots were compromised by an unknown attacker who replaced their regular transactions with malicious ones, leading to a significant loss of funds.
Wintermute’s decentralized finance trader, Joseph Plaza, speculated that the attacker used “bait” transactions to attract the MEV bots and then switched them with the harmful ones to siphon off their assets.
The attacker had been planning the attack for a while and became a validator by depositing 32 ETH 18 days prior to the incident. According to Plaza, the perpetrator likely bided their time until they had the opportunity to present a block as a validator, which is when they launched their attack.
By rearranging the block’s contents, they were able to construct a new block that included their own harmful transactions, ultimately draining assets in the process.
The incident was first brought to light on Twitter by “3155.eth”, a smart contract developer, who revealed that assets had been stolen. PeckShield subsequently identified three Ethereum addresses that received the stolen assets, consolidated from eight different addresses.
Flashbots, the company behind the popular MEV-Boost software utilized on Ethereum, has taken swift action to address potential issues. They have implemented a new safeguard that instructs relayers, the intermediaries between block builders and validators, to publish a signed block before sending it to a proposer.
This additional step reduces the chances of a malicious proposer using MEV-Boost to propose a block different from the one received from a relay.
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