SONNE FINANCE

DESCRIPTION OF EVENTS

"Sonne Finance is a decentralized lending protocol for individuals, institutions and protocols to access financial services. It is a permissionless, open source and Optimistic protocol serving users on Optimism. Users can deposit their assets, use them as collateral and borrow against them."

"Sonne Finance is an EVM compatible lending/borrowing protocol that launched on Optimism and expanded to Base. Sonne Finance provides peer-to-peer lending solutions that are fully decentralized, transparent and non-custodial.

Similar to (and based from) existing lending platforms like Compound Finance and AAVE users will be able to lend any supported assets on our platform, and use their capital to borrow supported assets."

"Sonne aims to be the prime lending platform on Optimism and Base by offering highest competitive incentives for money markets, having the deepest liquidity and being native to Optimism."

"A fork of Compound V2, Sonne held just over $60 million in TVL prior to the exploit."

"In an infuriating display of ignoring history, Sonne became the latest Compound fork to succumb to an exploit that had already taken down protocols like Hundred Finance a year prior."

"The Sonne Finance team deployed a new market contract for $VELO and a governance proposal was created to activate the market, which had a 4 day total governance period before going live."

"The exploiter appears to have targeted a known vulnerability that exists in all Aave and Compound forks: an attacker can manipulate the exchange rate of a new market with 0 suppliers, drive up the value of collateral, and borrow too much, stealing funds" "This vulnerability has resulted in multiple protocols losing user funds."

"It appears that 4 days ago, the @SonneFinance team deployed a new market contract for $VELO, and a governance proposal was created to activate the market, which has a 4 day total governance period before going live."

"When the governance proposal succeeded 3 days later, and the 24 hour timelock expired, it was now executable by anyone on the Optimism network. The attacker made sure they were the one to execute it, probably by running a bot and hoping they were first to strike. (no MEV on OP)"

"The attacker executed the proposal, along with their attack payload, all in a single transaction. The proposal set the collateral factor on the Sonne $VELO market to 35%, which enabled the attack to occur, and the protocol to immediately be drained of at least 7 figures of funds."

"How could this have been prevented? - Aave and Compound forks should take care to activate new markets without collateral enabled - They should also take care to ensure there are never 0 suppliers in a market. This can be done by sending collateral tokens to the burn address 0x0."

"Sonne was audited by Yearn Finance's yAudit.

The attack vector is listed as high finding, stating “Unclear protection against Hundred Finance attack vector.”"

"It is a tragedy that after many such cases of this exchange rate vulnerability being exploited, protocols continue to learn the hard way that you should not fork code that you don't understand. It is easy to fork open source code, but it is quite challenging to do so safely."

"Sonne Finance is working to recover the stolen funds, considering a bug bounty for their return."

Sonne Finance is a decentralized lending protocol operating on Optimism and Base. Similar to platforms like Compound Finance and AAVE, Sonne allows users to lend assets, use them as collateral, and borrow against them. Sonne fell victim to an exploit, losing $20 million. The exploit targeted a vulnerability present in AAVE and Compound forks, allowing the attacker to manipulate exchange rates and drain funds. This vulnerability had previously affected protocols like Hundred Finance. Sonne Finance released a post-mortem and it's unclear if funds will be recovered.

Sonne Finance (May 21)
Introduction | Sonne (May 21)
@SonneFinance Twitter (May 21)
@LukeYoungblood Twitter (May 21)
OP Mainnet Transaction Hash (Txhash) Details | OP Mainnet Etherscan  (May 21)
05-2023-Sonne | yAudit Reports (May 21)
@RektHQ Twitter (May 21)
Rekt - Sonne Finance - Rekt (May 21)
Post-mortem, Sonne Finance exploit | by Sonne Finance | May, 2024 | Medium (May 21)
@SonneFinance Twitter (May 21)
First Deposit Bug in CompoundV2 and its forks (May 21)
@TwapSlapper Twitter (May 21)

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