IMPOSSIBLE FINANCE

DESCRIPTION OF EVENTS

"Impossible Finance is a multi-chain incubator, launchpad, and swap platform which offers a robust product-first ecosystem that supports top-tier blockchain projects to targeted user audiences."

"Impossible Finance described the new “v2 swap design” as a big step forward, citing the increased flexibility it provides for market makers in how they provide liquidity into the protocol."

"The company touted the most significant improvement as a novel bonding curve called “xybk invariant,” which essentially achieves an artificial inflation of Total Value Locked (TVL) in pools by a multiplier of boost times."

"The enhancement also paves the way for low slippage trade execution while addressing the issue of Ethereum gas fees that have recently skyrocketed. The record transaction costs on the major blockchain have caused non-whale users to be slowly priced-out of DeFi because fees are eliminating their profits. In addition, many non-yield generating applications such as crypto-based gaming applications are becoming unusable on Ethereum Layer 1."

"On June 21, 2021 Impossible Finance LP contract design flaw was exploited which resulted in the loss of $700K."

"The DeFi protocol Impossible Finance on the BSC chain was attacked by lightning loans, and the attacker made a profit of 1,510.75 WBNB (a total of 497,000 US dollars)." "The attack on the Impossible Finance liquidity pool happened on June 21 and resulted in a loss of 229.84 Ethereum (ETH), valued $500.000 at the time of the exploit."

"Auditing service WatchPug explained that the attack involved consecutive swaps at about the same price, draining the liquidity pool, “which is usually impossible.”" "Using a vulnerability in the LP contract, the hacker managed to swap IF into BUSD at about the price 2 times in a row, which is usually “Impossible” because of the slippage."

Steps taken to produce the exploit: "(1) Borrow 233.3 BNB of flash loan from PancakeSwap. (2) Swapped 65,140 IF token. (3) Created a FAKE token called AAA (BBB). (4) Created LP with the FAKE token and IF. (5) Swapped 32,570 IF into 221,898 BUSD and another 32,570 IF into 221,898 BUSD using IF router thru the FAKE token LP. (6) Repeated the steps from 3 to 5. (7) Sold 556,384 BUSD for 1,731 BNB, repaid the flash loan."

"At step 5, the FAKE token got a special design that will call the swap() function of the LP contract, while the router calls the cheapSwap() function. The swap() call triggered by the transferFrom() of the FAKE token happened before the cheapSwap() call, which will update the price. So that the two swaps can be made at about the same price."

"Some of the funds were returned after an unknown action by BSC team."

"For full transparency we have written an event report and conducted a post-mortem analysis of this attack. Fortunately, this was an isolated incident and users' funds are safe. We are confident for a full recovery and have plans to emerge stronger from this." “All users who deposited into liquidity pools prior to the attack will be 100 percent compensated. We are confident for a full recovery and have plans to emerge stronger from this.”

Impossible Finance "completed full distribution of the reimbursed funds. Affected Liquidity Providers, please check your wallets for the reimbursed funds."

The Impossible Finance smart contract contained an exploit which allowed for draining the liquidity pool by creating a fake token.

This was exploited. Some funds were returned, and the team made up the difference.

HOW COULD THIS HAVE BEEN PREVENTED?

All affected users were made whole in this case.

Security of smart contracts is similar to hot wallets.

Complex smart contracts generally contain vulnerabilities and cannot be proven secure.

More secure forms of storage are generally simpler offline multi-sig wallets.

Check Our Framework For Safe Secure Exchange Platforms

SlowMist Hacked - SlowMist Zone (May 18)
No Title (Jul 24)
Impossible Finance Exploit Root Cause Analysis (Jul 24)
Impossible Finance V2 Swap Jun 21st Postmortem (Jul 24)
@johndoughbull Twitter (Jul 24)
Impossible Finance - DeFi made impossibly easy (Jul 28)
DeFi Project Impossible Finance Upgrades Swap Service with V2 Launch (Jul 28)
DeFi hacks on Binance Smart Chain continue as 'Impossible Finance' drained for $500k | CryptoSlate (Jul 28)
@WatchPug_ Twitter (Jul 28)
DeFi Protocol Impossible Finance Suffers $700k Heist | BTCMANAGER (Jul 28)
@impossiblefi Twitter (Jul 28)
@impossiblefi Twitter (Jul 28)
Impossible Finance 100 Compensation Plan (Jul 28)
blocksec-incidents/2021.md at main · openblocksec/blocksec-incidents · GitHub (Aug 11)
One thought of heaven, one thought of hell-Impossible Finance lightning loan attack incident tracking | by Knownsec Blockchain Lab | Medium (Aug 11)
@Mudit__Gupta Twitter (Aug 11)
@peckshield Twitter (Aug 11)
Binance Transaction Hash (Txhash) Details | BscScan (Aug 15)

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