Hackers have drained nearly $200 million worth of cryptocurrency from the Nomad blockchain platform. For context, Nomad is a crypto bridge that allows users to exchange cryptocurrencies between two or more blockchains. This comes as more bad news for Decentralized Finance (DeFi) Platforms that facilitate the borrowing and lending of crypto assets.
The hack was acknowledged by the official Twitter account of Project Nomad. The company confirmed the attack and said the team was “working around the clock to address the situation” and had notified law enforcement. Here, we explain how hackers drained one of the largest Nomad blockchain platforms.
To understand the severity of the hack, it is important to have some knowledge of blockchain bridges. Bridges in the real world connect two physical locations. Similarly, in the blockchain ecosystem, a bridge facilitates communication between two types of blockchain to facilitate the transfer of crypto assets.
For example, when you are planning a flight from India to the USA, you have INR but need US Dollars to spend. To exchange your INR for US dollars, you can use the currency exchange for a small fee. By using blockchain bridges, you can exchange crypto on another blockchain. Let’s say you own some Ethereum on the Ethereum blockchain and you want to transfer your crypto to the Arbitrum Chain. This is only possible through bridges. It is worth noting that blockchain bridges charge small transaction fees for themselves.
The attack was very simple and direct. It all started when the hackers upgraded the Nomad code. Notably, DeFi platforms are open protocols, which means that anyone can get access to the source code. This is one of the biggest reasons for hacking DeFi platforms. But it is not easy to make changes to the source code. Every change must be approved, and it is done automatically on the blockchain.
According to Samczsun, a researcher with crypto investment firm Paradigm and Web3, the exploit was possible due to an error in the project’s smart contract that automatically approved the changes made by the hacker, allowing permission to withdraw crypto assets. “This is why the hack was so messy,” Samczon wrote. The researcher believes that an army of attackers followed what was going on, deploying bots to carry out mock attacks and withdrawing more than $200 million in crypto assets.
In a post on Twitter, Nomad asked hackers to return the money. “If you were a white hat hacker/moral security researcher and took the tokens with the intention of returning them, we now have a process to do so.”
The company says it is actively working with leading intelligence firm TRM Labs, and with law enforcement to track money flows and identify recipient wallets to coordinate the return of funds. “As the investigation continues, all concerned are ready to take necessary action in the coming days, so please keep in mind that the timing of the refund is important,” the company said in a Twitter post.
Not the first time
This is not the first time that blockchain bridges have been a target for cybercriminals. In April 2022, the Blockchain Bridge was called Ronin has been used Theft of $600 million worth of cryptocurrency. Months later, it was Harmony, another bridge drain 100 million dollars In a similar attack.
Meanwhile, more than $1 billion in crypto assets have been stolen through bridge exploits so far in 2022, according to crypto compliance firm Elliptic. This is due to poor design cases that have made bridges a prime target for hackers.