Uniswap’s trading volume spiked above $2 billion, as unknown hackers used a flash loan offered by the exchange to gain $25 million from Harvest Finance.
The Block Director of Research Larry Cermark mentioned that,
Uniswap’s volume just had a massive outlier and spiked from $148M yesterday to $2 billion today. Why? The $FARM exploiter is running money through Uniswap. Good day for Uniswap LPs. pic.twitter.com/g4HQ3sHFU7
— Larry Cermak (@lawmaster) October 26, 2020
Reason behind Uniswap’s volume spike
Attackers executed a flash loan exploit that used millions of dollars worth of cryptocurrency across Uniswap. This is in order to drop down the prices of USDT and USDC tokens on Harvest Finance. As a result, attackers then bought those tokens at a discount. They used those tokens to pay back the initial flash loan while netting a large profit. Attackers did this multiple times, resulting in inflated volumes.
Yearn.Finance founder and DeFi developer Andre Cronje was quoted from a Telegram conversation explaining the basics of the exploit,
tl;dr on harvest exploit pic.twitter.com/4CyFEIGPt7
— banteg (@bantg) October 26, 2020
Moreover, Uniswap is a decentralized exchange (DEX) protocol that runs on the Ethereum (ETH) blockchain. As already mentioned, the exchanges’ trading volume exploded to over $2 billion yesterday. Obviously outperforming its previous all-time high of $950 million.
As per data from Uniswap Protocol Analytics, its 24-hour trading volume is $220 million, which is down over 89%.
Harvest Finance team announces $100,000 bounty
An anonymous team developed and runs Harvest Finance, a major decentralized finance protocol. Moreover, according to CoinGecko, FARM’s price is at $110, with a 24-hour volume of $12 million, at the time of writing.
Harvest team has halted deposits into several products. The team has also declared a $100,000 bounty for anyone who can help appeal to the attacker. They also alluded the public to provide any significant evidence that could be used to find them.
Similarly, the volume of Curve Finance, another DeFi swap protocol, exploded to more than $2.8 billion due to the flash loan exploit. However, this volume spike managed to broke the previous ATH of $524 million in September 2020.
Recently, Harvest Finance developers refused to leave centralized control of $1 billion among its TVL. This caused its community supporters to be skeptical of the protocol’s team.
Moreover, DeFi protocols like Uniswap and Curve Finance use pooled crypto deposits from liquidity providers to allow traders to swap between tokens automatically. Consequently, the higher the volume of trades, the more fees DeFi liquidity providers earn from DEXs.
