Euler Finance Receives "Generous" Donations - Revision history

Azoundria: Another 30 minutes completed. Information from about spread around. Added CoinTelegraph and various additional sources referenced from that article. Expansion of the timeline accordingly.

2024-01-19T20:05:50Z

Another 30 minutes completed. Information from about spread around. Added CoinTelegraph and various additional sources referenced from that article. Expansion of the timeline accordingly.

Show changes

Azoundria: All complete another 30 minutes now.

2023-05-17T23:43:54Z

All complete another 30 minutes now.

← Older revision		Revision as of 17:43, 17 May 2023
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	=== Audits Provided ===		=== Audits Provided ===
	~~<ref name="eulerfinancedocs-10807" />~~<ref>[https://web.archive.org/web/20230201221522/https://docs.euler.finance/security/audits Audits - Euler Finance Docs Archive February 1st, 2023 3:15:22 PM MST] (May 17, 2023)</ref>		The Euler Finance protocol had been extensively audited<ref>[https://web.archive.org/web/20230201221522/https://docs.euler.finance/security/audits Audits - Euler Finance Docs Archive February 1st, 2023 3:15:22 PM MST] (May 17, 2023)</ref> and had ongoing coverage for new changes by Sherlock<ref name="omnisciamedium-10808" />.

	== The Reality ==		== The Reality ==
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	* How the service was structured behind the scenes. (For example, there was no "trading bot".)		* How the service was structured behind the scenes. (For example, there was no "trading bot".)
	* Details of what audits reported and how vulnerabilities were missed during auditing.		* Details of what audits reported and how vulnerabilities were missed during auditing.
			The particular donateToReserve function which was changed in EIP14 was not covered by the Omniscia audit<ref name="omnisciamedium-10808" />.

	== What Happened ==		== What Happened ==
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	=== Omnisicia Post-Mortem ===		=== Omnisicia Post-Mortem ===
	Omniscia, the firm which audited the smart contract, released a post-mortem of the incident<ref name="omnisciamedium-10808" />.		Omniscia, the firm which audited the smart contract, released a post-mortem of the incident<ref name="omnisciamedium-10808" />.


			Euler Finance has continued to get more extensive audits of their smart contract<ref name="eulerfinancedocs-10807" />.

	== Total Amount Recovered ==		== Total Amount Recovered ==

Azoundria at 23:39, 17 May 2023

2023-05-17T23:39:58Z

← Older revision		Revision as of 17:39, 17 May 2023
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	\|March 14th, 2023 11:20:00 AM MDT		\|March 14th, 2023 11:20:00 AM MDT
	\|RektHQ Article Published		\|RektHQ Article Published
	\|RektHQ posts an article on the exploit<ref~~>[https://twitter.com/RektHQ/status/1635692307973324800 RektHQ~~ - "~~Against the backdrop of a banking meltdown and stablecoin crisis, @eulerfinance was struck a $197M blow." - Twitter] (May 3, 2023)<~~/~~ref~~>. On March 14, 2023, Euler Finance, one of DeFi's most established lending protocols, suffered a $197 million exploit. The hack involved a little-used donateToReserves function that was incorporated into Euler via EIP14 last year, which allowed the hacker to send eTokens to Euler reserves without checking the health of the user's position. The hacker used two contracts, one of which would incur bad debt via donateToReserves, and the other would act as a liquidator. Using flash-loaned funds and Euler's leverage system, the hacker created a large, underwater position on one contract, allowing the liquidator contract to obtain the inflated eToken collateral at a discount and withdraw into the underlying assets. Euler reached out to the attacker's address, but some funds were already sent to Tornado via a pass-through address in what seems like a test. The exploit not only affected Euler but also other DeFi projects that had funds tied up in the protocol. This event highlights the importance of resilient infrastructure for DeFi's future<ref name="rektnews-10806" />.		\|RektHQ posts an article on the exploit<ref name="rekthqtwitter-10811" />. On March 14, 2023, Euler Finance, one of DeFi's most established lending protocols, suffered a $197 million exploit. The hack involved a little-used donateToReserves function that was incorporated into Euler via EIP14 last year, which allowed the hacker to send eTokens to Euler reserves without checking the health of the user's position. The hacker used two contracts, one of which would incur bad debt via donateToReserves, and the other would act as a liquidator. Using flash-loaned funds and Euler's leverage system, the hacker created a large, underwater position on one contract, allowing the liquidator contract to obtain the inflated eToken collateral at a discount and withdraw into the underlying assets. Euler reached out to the attacker's address, but some funds were already sent to Tornado via a pass-through address in what seems like a test. The exploit not only affected Euler but also other DeFi projects that had funds tied up in the protocol. This event highlights the importance of resilient infrastructure for DeFi's future<ref name="rektnews-10806" />.
	\|}		\|}

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	<ref name="etherscan-10809">[https://etherscan.io/tx/0xc310a0affe2169d1f6feec1c63dbc7f7c62a887fa48795d327d4d2da2d6b111d Euler Finance Exploit Transaction - Etherscan] (May 3, 2023)</ref>		<ref name="etherscan-10809">[https://etherscan.io/tx/0xc310a0affe2169d1f6feec1c63dbc7f7c62a887fa48795d327d4d2da2d6b111d Euler Finance Exploit Transaction - Etherscan] (May 3, 2023)</ref>
	<ref name="etherscan-10810">[https://etherscan.io/address/0xb66cd966670d962c227b3eaba30a872dbfb995db Euler Finance Exploiter Contract #2 - Etherscan] (May 3, 2023)</ref>		<ref name="etherscan-10810">[https://etherscan.io/address/0xb66cd966670d962c227b3eaba30a872dbfb995db Euler Finance Exploiter Contract #2 - Etherscan] (May 3, 2023)</ref>
	<ref name="rekthqtwitter-10811">[https://twitter.com/RektHQ/status/1635692307973324800 @~~RektHQ~~ Twitter] (May 3, 2023)</ref>		<ref name="rekthqtwitter-10811">[https://twitter.com/RektHQ/status/1635692307973324800 RektHQ - "Against the backdrop of a banking meltdown and stablecoin crisis, @eulerfinance was struck a $197M blow." - Twitter] (May 3, 2023)</ref>
	<ref name="eulerfinanceforum-10812">[https://forum.euler.finance/t/eip-14-contract-upgrades/305 <nowiki>eIP 14: Contract Upgrades - [eIP] Euler Improvement Proposals - Euler Governance Forum</nowiki>] (May 3, 2023)</ref>		<ref name="eulerfinanceforum-10812">[https://forum.euler.finance/t/eip-14-contract-upgrades/305 <nowiki>eIP 14: Contract Upgrades - [eIP] Euler Improvement Proposals - Euler Governance Forum</nowiki>] (May 3, 2023)</ref>
	<ref name="eulerxyz-10813">[https://euler-xyz.github.io/euler-contracts-upgrade-diffs/eip14/EToken.html Euler Finance Diff: contracts/modules/EToken.sol - Github Diff] (May 3, 2023)</ref>		<ref name="eulerxyz-10813">[https://euler-xyz.github.io/euler-contracts-upgrade-diffs/eip14/EToken.html Euler Finance Diff: contracts/modules/EToken.sol - Github Diff] (May 3, 2023)</ref>

Azoundria: More there

2023-05-17T23:38:34Z

More there

← Older revision		Revision as of 17:38, 17 May 2023
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	== Technical Details ==		== Technical Details ==
	This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?<ref name="omnisciamedium-10808" /><ref name="eulerfinanceforum-10812" /><ref name="eulerxyz-10813" /><ref name="eulerxyzgithub-10814" /><ref name="eulerxyzgithub-10815" /><ref name="eulerfinancedocs-10816" /><ref name="etherscan-10817" /><ref name="etherscan-10818" /><ref name="etherscan-10819" /><ref name="eulerxyzgithub-10820" /><ref name="etherscan-10810" /><ref name="etherscan-10809" />		This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?<ref name="omnisciamedium-10808" /><ref name="eulerfinanceforum-10812" /><ref name="eulerxyz-10813" /><ref name="eulerxyzgithub-10814" /><ref name="eulerxyzgithub-10815" /><ref name="eulerfinancedocs-10816" /><ref name="etherscan-10817" /><ref name="etherscan-10818" /><ref name="etherscan-10819" /><ref name="eulerxyzgithub-10820" /><ref name="etherscan-10810" /><ref name="etherscan-10809" />

			Omniscia denies any responsibility for the exploit, as their audit did not cover the donateToReserve function<ref name="omnisciamedium-10808" />.<blockquote>The EToken::donateToReserve feature that is at the crux of this vulnerability was not in scope of any audit conducted by Omniscia. As such, the code that causes the vulnerability was never in scope of any audit conducted by our team.</blockquote>

	== Total Amount Lost ==		== Total Amount Lost ==
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	== Total Amount Recovered ==		== Total Amount Recovered ==
	There do not appear to have been any funds recovered in this case.		According to the Omniscia audit, there was an active coverage policy<ref name="omnisciamedium-10808" />.<blockquote>The donateToReserves function was audited by the Sherlock team in July 2022. Euler Finance and Sherlock have confirmed that Euler had an active coverage policy with Sherlock at the time of exploit.</blockquote>There do not appear to have been any funds recovered in this case.

	What funds were recovered? What funds were reimbursed for those affected users?		What funds were recovered? What funds were reimbursed for those affected users?
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	== Ongoing Developments ==		== Ongoing Developments ==
	What parts of this case are still remaining to be concluded?		What parts of this case are still remaining to be concluded?

	== Individual Prevention Policies ==		== Individual Prevention Policies ==
	{{Prevention:Individual:Avoid Using Smart Contracts}}		{{Prevention:Individual:Avoid Using Smart Contracts}}

Azoundria: Another 30 minutes complete.

2023-05-17T23:05:10Z

Another 30 minutes complete.

Show changes

Azoundria: Initial 30 minutes completed.

2023-05-03T23:53:42Z

Initial 30 minutes completed.

← Older revision		Revision as of 17:53, 3 May 2023
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	[[File:Eulerfinance.jpg\|thumb\|Euler Finance Homepage]]Euler is a non-custodial permissionless lending protocol on Ethereum that enables users to lend and borrow almost any crypto asset. It features a number of innovations, including permissionless lending markets, reactive interest rates, protected collateral, and multi-collateral stability pools. Users can create artificial leverage by minting and depositing assets, but the donateToReserves function was exploited, allowing a hacker to create an unbacked DToken debt. The vulnerability was missed by auditors and smart contract insurance protocol Sherlock, which will pay a claim of $4.5M to Euler. Total losses from the attack were $134.6M in ETH derivatives, $18.6M in WBTC, 34M USDC, and 8.9M DAI.		[[File:Eulerfinance.jpg\|thumb\|Euler Finance Homepage]]Euler is a non-custodial permissionless lending protocol on Ethereum that enables users to lend and borrow almost any crypto asset. It features a number of innovations, including permissionless lending markets, reactive interest rates, protected collateral, and multi-collateral stability pools. Users can create artificial leverage by minting and depositing assets, but the donateToReserves function was exploited, allowing a hacker to create an unbacked DToken debt. The vulnerability was missed by auditors and smart contract insurance protocol Sherlock, which will pay a claim of $4.5M to Euler. Total losses from the attack were $134.6M in ETH derivatives, $18.6M in WBTC, 34M USDC, and 8.9M DAI.

	This is a global/international case not involving a specific country.~~<ref name="rektnews-10806" />~~<ref name="eulerfinancedocs-10807" /><ref name="omnisciamedium-10808" /><ref name="etherscan-10809" /><ref name="etherscan-10810" /><ref name="rekthqtwitter-10811" /><ref name="eulerfinanceforum-10812" /><ref name="eulerxyz-10813" /><ref name="eulerxyzgithub-10814" /><ref name="eulerxyzgithub-10815" /><ref name="eulerfinancedocs-10816" /><ref name="etherscan-10817" /><ref name="etherscan-10818" /><ref name="etherscan-10819" /><ref name="eulerxyzgithub-10820~~" /><ref name="eulerfinancetwitter-10821" /><ref name="eulerfinance-10822" /><ref name="eulerfinancedocs-10823" /><ref name="eulerfinancedocs-10824~~" />		This is a global/international case not involving a specific country.<ref name="eulerfinancedocs-10807" /><ref name="omnisciamedium-10808" /><ref name="etherscan-10809" /><ref name="etherscan-10810" /><ref name="rekthqtwitter-10811" /><ref name="eulerfinanceforum-10812" /><ref name="eulerxyz-10813" /><ref name="eulerxyzgithub-10814" /><ref name="eulerxyzgithub-10815" /><ref name="eulerfinancedocs-10816" /><ref name="etherscan-10817" /><ref name="etherscan-10818" /><ref name="etherscan-10819" /><ref name="eulerxyzgithub-10820" />

	== About Euler Finance ==		== About Euler Finance ==
			<ref name="eulerfinance-10822" /><ref name="eulerfinancedocs-10823" /><ref name="eulerfinancedocs-10824" />

	"Democratising the assets people can lend and borrow. Euler is a non-custodial protocol on Ethereum that allows users to lend and borrow almost any crypto asset."		"Democratising the assets people can lend and borrow. Euler is a non-custodial protocol on Ethereum that allows users to lend and borrow almost any crypto asset."

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	== The Reality ==		== The Reality ==
			<ref name="eulerfinanceforum-10812" /><ref name="eulerxyz-10813" /><ref name="eulerxyzgithub-10814" /><ref name="eulerxyzgithub-10815" /><ref name="eulerxyzgithub-10820" />

	This sections is included if a case involved deception or information that was unknown at the time. Examples include:		This sections is included if a case involved deception or information that was unknown at the time. Examples include:

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	\|March 13th, 2023 2:50:59 AM MDT		\|March 13th, 2023 2:50:59 AM MDT
	\|Exploit Transaction		\|Exploit Transaction
	\|One of the exploit transactions.		\|One of the exploit transactions.<ref name="etherscan-10817" />
			\|-
			\|March 13th, 2023 3:56:00 AM MDT
			\|Euler Finance Twitter Announcement
			\|Euler Finance posts on Twitter to announce that they are "aware and our team is currently working with security professionals and law enforcement"<ref name="eulerfinancetwitter-10821" />. TBD follow Tweet to PeckShield.
			\|-
			\|March 14th, 2023 11:20:00 AM MDT
			\|RektHQ Article Published
			\|RektHQ posts an article on the exploit<ref>[https://twitter.com/RektHQ/status/1635692307973324800 RektHQ - "Against the backdrop of a banking meltdown and stablecoin crisis, @eulerfinance was struck a $197M blow." - Twitter] (May 3, 2023)</ref>. On March 14, 2023, Euler Finance, one of DeFi's most established lending protocols, suffered a $197 million exploit. The hack involved a little-used donateToReserves function that was incorporated into Euler via EIP14 last year, which allowed the hacker to send eTokens to Euler reserves without checking the health of the user's position. The hacker used two contracts, one of which would incur bad debt via donateToReserves, and the other would act as a liquidator. Using flash-loaned funds and Euler's leverage system, the hacker created a large, underwater position on one contract, allowing the liquidator contract to obtain the inflated eToken collateral at a discount and withdraw into the underlying assets. Euler reached out to the attacker's address, but some funds were already sent to Tornado via a pass-through address in what seems like a test. The exploit not only affected Euler but also other DeFi projects that had funds tied up in the protocol. This event highlights the importance of resilient infrastructure for DeFi's future<ref name="rektnews-10806" />.
	\|}		\|}

	== Technical Details ==		== Technical Details ==
	This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?		This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?<ref name="omnisciamedium-10808" /><ref name="eulerfinanceforum-10812" /><ref name="eulerxyz-10813" /><ref name="eulerxyzgithub-10814" /><ref name="eulerxyzgithub-10815" /><ref name="eulerfinancedocs-10816" /><ref name="etherscan-10817" /><ref name="etherscan-10818" /><ref name="etherscan-10819" /><ref name="eulerxyzgithub-10820" />

	== Total Amount Lost ==		== Total Amount Lost ==
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	== References ==		== References ==
	<references><ref name="rektnews-10806">[https://rekt.news/euler-rekt/ Rekt - Euler Finance - REKT] (May 3, 2023)</ref>		<references>
			<ref name="rektnews-10806">[https://rekt.news/euler-rekt/ Rekt - Euler Finance - REKT] (May 3, 2023)</ref>
	<ref name="eulerfinancedocs-10807">~~[https://docs.euler.finance/security/audits~~ https://docs.euler.finance/security/audits] (May 3, 2023)</ref>		<ref name="eulerfinancedocs-10807">https://docs.euler.finance/security/audits (May 3, 2023)</ref>

	<ref name="omnisciamedium-10808">[https://medium.com/@omniscia.io/euler-finance-incident-post-mortem-1ce077c28454 Euler Finance Incident Post-Mortem \| by Omniscia \| Mar, 2023 \| Medium] (May 3, 2023)</ref>		<ref name="omnisciamedium-10808">[https://medium.com/@omniscia.io/euler-finance-incident-post-mortem-1ce077c28454 Euler Finance Incident Post-Mortem \| by Omniscia \| Mar, 2023 \| Medium] (May 3, 2023)</ref>

	<ref name="etherscan-10809">[https://etherscan.io/tx/0xc310a0affe2169d1f6feec1c63dbc7f7c62a887fa48795d327d4d2da2d6b111d Ethereum Transaction Hash (Txhash) Details \| Etherscan] (May 3, 2023)</ref>		<ref name="etherscan-10809">[https://etherscan.io/tx/0xc310a0affe2169d1f6feec1c63dbc7f7c62a887fa48795d327d4d2da2d6b111d Ethereum Transaction Hash (Txhash) Details \| Etherscan] (May 3, 2023)</ref>

	<ref name="etherscan-10810">[https://etherscan.io/address/0xb66cd966670d962c227b3eaba30a872dbfb995db Euler Finance Exploiter 2 \| Address 0xb66cd966670d962c227b3eaba30a872dbfb995db \| Etherscan] (May 3, 2023)</ref>		<ref name="etherscan-10810">[https://etherscan.io/address/0xb66cd966670d962c227b3eaba30a872dbfb995db Euler Finance Exploiter 2 \| Address 0xb66cd966670d962c227b3eaba30a872dbfb995db \| Etherscan] (May 3, 2023)</ref>

	<ref name="rekthqtwitter-10811">[https://twitter.com/RektHQ/status/1635692307973324800 @RektHQ Twitter] (May 3, 2023)</ref>		<ref name="rekthqtwitter-10811">[https://twitter.com/RektHQ/status/1635692307973324800 @RektHQ Twitter] (May 3, 2023)</ref>

	<ref name="eulerfinanceforum-10812">[https://forum.euler.finance/t/eip-14-contract-upgrades/305 <nowiki>eIP 14: Contract Upgrades - [eIP] Euler Improvement Proposals - Euler Governance Forum</nowiki>] (May 3, 2023)</ref>		<ref name="eulerfinanceforum-10812">[https://forum.euler.finance/t/eip-14-contract-upgrades/305 <nowiki>eIP 14: Contract Upgrades - [eIP] Euler Improvement Proposals - Euler Governance Forum</nowiki>] (May 3, 2023)</ref>
			<ref name="eulerxyz-10813">https://euler-xyz.github.io/euler-contracts-upgrade-diffs/eip14/EToken.html (May 3, 2023)</ref>
	<ref name="eulerxyz-10813">[https://euler-xyz.github.io/euler-contracts-upgrade-diffs/eip14/EToken.html ~~https://euler-xyz.github.io/euler-contracts-upgrade-diffs/eip14/EToken.html]~~ (May 3, 2023)</ref>

	<ref name="eulerxyzgithub-10814">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/modules/Liquidation.sol#L139-L151 euler-contracts/Liquidation.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>		<ref name="eulerxyzgithub-10814">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/modules/Liquidation.sol#L139-L151 euler-contracts/Liquidation.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>

	<ref name="eulerxyzgithub-10815">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/modules/EToken.sol#L356-L386 euler-contracts/EToken.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>		<ref name="eulerxyzgithub-10815">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/modules/EToken.sol#L356-L386 euler-contracts/EToken.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>
			<ref name="eulerfinancedocs-10816">https://docs.euler.finance/euler-protocol/eulers-default-parameters#maximum-liquidation-discount (May 3, 2023)</ref>
	<ref name="eulerfinancedocs-10816">[https://docs.euler.finance/euler-protocol/eulers-default-parameters#maximum-liquidation-discount ~~https://docs.euler.finance/euler-protocol/eulers-default-parameters#maximum-liquidation-discount]~~ (May 3, 2023)</ref>

	<ref name="etherscan-10817">[https://etherscan.io/address/0xebc29199c817dc47ba12e3f86102564d640cbf99 Euler Exploit Contract 1 \| Address 0xebc29199c817dc47ba12e3f86102564d640cbf99 \| Etherscan] (May 3, 2023)</ref>		<ref name="etherscan-10817">[https://etherscan.io/address/0xebc29199c817dc47ba12e3f86102564d640cbf99 Euler Exploit Contract 1 \| Address 0xebc29199c817dc47ba12e3f86102564d640cbf99 \| Etherscan] (May 3, 2023)</ref>

	<ref name="etherscan-10818">[https://etherscan.io/address/0x583c21631c48d442b5c0e605d624f54a0b366c72 Contract Address 0x583c21631c48d442b5c0e605d624f54a0b366c72 \| Etherscan] (May 3, 2023)</ref>		<ref name="etherscan-10818">[https://etherscan.io/address/0x583c21631c48d442b5c0e605d624f54a0b366c72 Contract Address 0x583c21631c48d442b5c0e605d624f54a0b366c72 \| Etherscan] (May 3, 2023)</ref>

	<ref name="etherscan-10819">[https://etherscan.io/address/0xa0b3ee897f233f385e5d61086c32685257d4f12b Contract Address 0xa0b3ee897f233f385e5d61086c32685257d4f12b \| Etherscan] (May 3, 2023)</ref>		<ref name="etherscan-10819">[https://etherscan.io/address/0xa0b3ee897f233f385e5d61086c32685257d4f12b Contract Address 0xa0b3ee897f233f385e5d61086c32685257d4f12b \| Etherscan] (May 3, 2023)</ref>

	<ref name="eulerxyzgithub-10820">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/BaseLogic.sol#L292-L296 euler-contracts/BaseLogic.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>		<ref name="eulerxyzgithub-10820">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/BaseLogic.sol#L292-L296 euler-contracts/BaseLogic.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>
			<ref name="eulerfinancetwitter-10821">[https://twitter.com/eulerfinance/status/1635218198042918918 eulerfinance - "We are aware and our team is currently working with security professionals and law enforcement. We will release further information as soon as we have it." - Twitter] (May 3, 2023)</ref>
	<ref name="eulerfinancetwitter-10821">[https://twitter.com/eulerfinance/status/1635218198042918918 @eulerfinance Twitter] (May 3, 2023)</ref>		<ref name="eulerfinance-10822">https://www.euler.finance/ (May 3, 2023)</ref>
			<ref name="eulerfinancedocs-10823">https://docs.euler.finance/getting-started/introduction (May 3, 2023)</ref>
	<ref name="eulerfinance-10822">~~[https://www.euler.finance/~~ https://www.euler.finance/] (May 3, 2023)</ref>		<ref name="eulerfinancedocs-10824">https://docs.euler.finance/getting-started/white-paper (May 3, 2023)</ref>
			</references>
	<ref name="eulerfinancedocs-10823">[https://docs.euler.finance/getting-started/introduction ~~https://docs.euler.finance/getting-started/introduction]~~ (May 3, 2023)</ref>

	<ref name="eulerfinancedocs-10824">[https://docs.euler.finance/getting-started/white-paper ~~https://docs.euler.finance/getting-started/white-paper]~~ (May 3, 2023)</ref></references>

Azoundria: Created page with "{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/eulerfinancereceivesgenerousdonations.php}} {{Unattributed Sources}} Euler Finance HomepageEuler is a non-custodial permissionless lending protocol on Ethereum that enables users to lend and borrow almost any crypto asset. It features a number of innovations, including permissionless lending markets, reactive interest rates, protected collateral, and multi-collatera..."

2023-05-03T22:53:43Z

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{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/eulerfinancereceivesgenerousdonations.php}}
{{Unattributed Sources}}

[[File:Eulerfinance.jpg|thumb|Euler Finance Homepage]]Euler is a non-custodial permissionless lending protocol on Ethereum that enables users to lend and borrow almost any crypto asset. It features a number of innovations, including permissionless lending markets, reactive interest rates, protected collateral, and multi-collateral stability pools. Users can create artificial leverage by minting and depositing assets, but the donateToReserves function was exploited, allowing a hacker to create an unbacked DToken debt. The vulnerability was missed by auditors and smart contract insurance protocol Sherlock, which will pay a claim of $4.5M to Euler. Total losses from the attack were $134.6M in ETH derivatives, $18.6M in WBTC, 34M USDC, and 8.9M DAI.

This is a global/international case not involving a specific country.<ref name="rektnews-10806" /><ref name="eulerfinancedocs-10807" /><ref name="omnisciamedium-10808" /><ref name="etherscan-10809" /><ref name="etherscan-10810" /><ref name="rekthqtwitter-10811" /><ref name="eulerfinanceforum-10812" /><ref name="eulerxyz-10813" /><ref name="eulerxyzgithub-10814" /><ref name="eulerxyzgithub-10815" /><ref name="eulerfinancedocs-10816" /><ref name="etherscan-10817" /><ref name="etherscan-10818" /><ref name="etherscan-10819" /><ref name="eulerxyzgithub-10820" /><ref name="eulerfinancetwitter-10821" /><ref name="eulerfinance-10822" /><ref name="eulerfinancedocs-10823" /><ref name="eulerfinancedocs-10824" />

== About Euler Finance ==
"Democratising the assets people can lend and borrow. Euler is a non-custodial protocol on Ethereum that allows users to lend and borrow almost any crypto asset."

"Euler is a non-custodial permissionless lending protocol on Ethereum that helps users to earn interest on their crypto assets or hedge against volatile markets without the need for a trusted third-party. Euler protocol features a number of innovations not seen before in DeFi, including permissionless lending markets, reactive interest rates, protected collateral, MEV-resistant liquidations, multi-collateral stability pools, and much more. For more information, read the White Paper."

"Euler comprises a set of smart contracts deployed on the Ethereum blockchain that can be openly accessed by anyone with an internet connection. Euler is managed by holders of a protocol native governance token called Euler Governance Token (EUL). Euler is entirely non-custodial; users are responsible for managing their own funds. A convenient and user-friendly front-end to for the Euler smart contracts is hosted at https://app.euler.finance. However, users are free to access the protocol in whatever format they wish; a popular alternative can be found at https://instadapp.io/."

"Permissionless listing is much riskier on decentralised lending protocols than on other DeFi protocols, like decentralised exchanges, because of the potential for risk to spill over from one pool to another in quick succession. For example, if a collateral asset suddenly decreases in price, and subsequent liquidations fail to repay borrowers' debts sufficiently, then the pools of multiple different types of assets can be left with bad debts. To counter these challenges, Euler uses risk-based asset tiers to protect the protocol and its users."

"The Euler Finance protocol permits its users to create artificial leverage by minting and depositing assets in the same transaction via EToken::mint. This mechanism permits tokens to be minted that exceed the collateral held by the Euler Finance protocol itself.

The donation mechanism introduced by Euler Finance in eIP-14¹ (EToken::donateToReserves) permits a user to donate their balance to the reserveBalance of the token they are transacting with. The flaw lies in that it does not perform any health check on the account that is performing the donation."

"Lending on Euler is managed via eTokens (collateral) and dTokens (debt), with liquidations triggered when a user has more dTokens than eTokens.

The exploited vulnerability involved the little-used donateToReserves function which was incorporated into Euler via EIP14 last year. donateToReserves allows users to send eTokens to directly to Euler reserves, however does not contain a check on the health of the user’s position.

The hacker took advantage of this by using two contracts, one of which would incur bad debt via donateToReserves, and the other would act as liquidator.

Using flash-loaned funds and Euler’s leverage system to create a large, underwater position on one contract, the liquidator contract could obtain the inflated eToken collateral at a discount, and withdraw into the underlying assets.

Omniscia, one of Euler’s six auditors, published a detailed post-mortem, summing up the issue as follows:

The attack ultimately arose from an incorrect donation mechanism and did not account for the donator’s debt health, permitting them to create an unbacked DToken debt that will never be liquidated."

"The vulnerability that was exploited stems from how Euler Finance permits donations to be performed without a proper account health check.

The vulnerable code was introduced in eIP-14¹ which introduced multiple changes throughout the Euler Ecosystem. The flaw lies in the first change performed to the EToken implementation (EToken::donateToReserves feature²).

The logic within the Liquidation module will attempt to repay the full debt of the violator, however, if the collateral they possess would not satisfy the expected repayment yield, the system defaults to whatever collateral the user has³.

The assumption of this code block states that a borrower’s available collateral will be insufficient only when:

This can happen when borrower has multiple collaterals and seizing all of this one won’t bring the violator back to solvency

This security guarantee is not upheld by the donation mechanism which permits the user to create “bad debt” in the form of leverage that is uncollateralized by donating their EToken units without affecting their DToken balance."

"SlowMist provided a summary of the addresses and transactions involved: total losses comprised 86k in ETH derivatives ($134.6M), 849 WBTC ($18.6M), 34M USDC, 8.9M DAI."

"Auditors and smart contract insurance protocol Sherlock has taken responsibility for missing the vulnerability in their review of EIP-14 last year, and will pay a claim of $4.5M to Euler.

Euler reached out to the attacker’s address via tx input data:

We understand that you are responsible for this morning's attack on the Euler platform. We are writing to see whether you would be open to speaking with us about any potential next steps.

But with some funds having been sent to Tornado via a pass-through address in what seems like a test, the prospects of returned funds aren’t looking good…

Given Euler’s high-profile and stable reputation, many other DeFi organisations had funds tied up in the protocol.

The fact that so many other projects chose to integrate with Euler is a testament to just how shocking this exploit has been for the community. And many have reached out in support of the Euler team."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

* Known history of when and how the service was started.
* What problems does the company or service claim to solve?
* What marketing materials were used by the firm or business?
* Audits performed, and excerpts that may have been included.
* Business registration documents shown (fake or legitimate).
* How were people recruited to participate?
* Public warnings and announcements prior to the event.

Don't Include:
* Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
* Anything that wasn't reasonably knowable at the time of the event.
There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

== The Reality ==
This sections is included if a case involved deception or information that was unknown at the time. Examples include:

* When the service was actually started (if different than the "official story").
* Who actually ran a service and their own personal history.
* How the service was structured behind the scenes. (For example, there was no "trading bot".)
* Details of what audits reported and how vulnerabilities were missed during auditing.

== What Happened ==
The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.
{| class="wikitable"
|+Key Event Timeline - Euler Finance Receives "Generous" Donations
!Date
!Event
!Description
|-
|March 13th, 2023 2:50:59 AM MDT
|Exploit Transaction
|One of the exploit transactions.
|}

== Technical Details ==
This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

== Total Amount Lost ==
The total amount lost has been estimated at $196,100,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

== Immediate Reactions ==
How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

== Ultimate Outcome ==
What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

== Total Amount Recovered ==
There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

== Ongoing Developments ==
What parts of this case are still remaining to be concluded?
== Individual Prevention Policies ==
{{Prevention:Individuals:Placeholder}}

{{Prevention:Individuals:End}}

== Platform Prevention Policies ==
{{Prevention:Platforms:Placeholder}}

{{Prevention:Platforms:End}}

== Regulatory Prevention Policies ==
{{Prevention:Regulators:Placeholder}}

{{Prevention:Regulators:End}}

== References ==
<references><ref name="rektnews-10806">[https://rekt.news/euler-rekt/ Rekt - Euler Finance - REKT] (May 3, 2023)</ref>

<ref name="eulerfinancedocs-10807">[https://docs.euler.finance/security/audits https://docs.euler.finance/security/audits] (May 3, 2023)</ref>

<ref name="omnisciamedium-10808">[https://medium.com/@omniscia.io/euler-finance-incident-post-mortem-1ce077c28454 Euler Finance Incident Post-Mortem | by Omniscia | Mar, 2023 | Medium] (May 3, 2023)</ref>

<ref name="etherscan-10809">[https://etherscan.io/tx/0xc310a0affe2169d1f6feec1c63dbc7f7c62a887fa48795d327d4d2da2d6b111d Ethereum Transaction Hash (Txhash) Details | Etherscan] (May 3, 2023)</ref>

<ref name="etherscan-10810">[https://etherscan.io/address/0xb66cd966670d962c227b3eaba30a872dbfb995db Euler Finance Exploiter 2 | Address 0xb66cd966670d962c227b3eaba30a872dbfb995db | Etherscan] (May 3, 2023)</ref>

<ref name="rekthqtwitter-10811">[https://twitter.com/RektHQ/status/1635692307973324800 @RektHQ Twitter] (May 3, 2023)</ref>

<ref name="eulerfinanceforum-10812">[https://forum.euler.finance/t/eip-14-contract-upgrades/305 <nowiki>eIP 14: Contract Upgrades - [eIP] Euler Improvement Proposals - Euler Governance Forum</nowiki>] (May 3, 2023)</ref>

<ref name="eulerxyz-10813">[https://euler-xyz.github.io/euler-contracts-upgrade-diffs/eip14/EToken.html https://euler-xyz.github.io/euler-contracts-upgrade-diffs/eip14/EToken.html] (May 3, 2023)</ref>

<ref name="eulerxyzgithub-10814">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/modules/Liquidation.sol#L139-L151 euler-contracts/Liquidation.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>

<ref name="eulerxyzgithub-10815">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/modules/EToken.sol#L356-L386 euler-contracts/EToken.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>

<ref name="eulerfinancedocs-10816">[https://docs.euler.finance/euler-protocol/eulers-default-parameters#maximum-liquidation-discount https://docs.euler.finance/euler-protocol/eulers-default-parameters#maximum-liquidation-discount] (May 3, 2023)</ref>

<ref name="etherscan-10817">[https://etherscan.io/address/0xebc29199c817dc47ba12e3f86102564d640cbf99 Euler Exploit Contract 1 | Address 0xebc29199c817dc47ba12e3f86102564d640cbf99 | Etherscan] (May 3, 2023)</ref>

<ref name="etherscan-10818">[https://etherscan.io/address/0x583c21631c48d442b5c0e605d624f54a0b366c72 Contract Address 0x583c21631c48d442b5c0e605d624f54a0b366c72 | Etherscan] (May 3, 2023)</ref>

<ref name="etherscan-10819">[https://etherscan.io/address/0xa0b3ee897f233f385e5d61086c32685257d4f12b Contract Address 0xa0b3ee897f233f385e5d61086c32685257d4f12b | Etherscan] (May 3, 2023)</ref>

<ref name="eulerxyzgithub-10820">[https://github.com/euler-xyz/euler-contracts/blob/fa9398728165676a5666939d8c34a7578d8e1919/contracts/BaseLogic.sol#L292-L296 euler-contracts/BaseLogic.sol at fa9398728165676a5666939d8c34a7578d8e1919 · euler-xyz/euler-contracts · GitHub] (May 3, 2023)</ref>

<ref name="eulerfinancetwitter-10821">[https://twitter.com/eulerfinance/status/1635218198042918918 @eulerfinance Twitter] (May 3, 2023)</ref>

<ref name="eulerfinance-10822">[https://www.euler.finance/ https://www.euler.finance/] (May 3, 2023)</ref>

<ref name="eulerfinancedocs-10823">[https://docs.euler.finance/getting-started/introduction https://docs.euler.finance/getting-started/introduction] (May 3, 2023)</ref>

<ref name="eulerfinancedocs-10824">[https://docs.euler.finance/getting-started/white-paper https://docs.euler.finance/getting-started/white-paper] (May 3, 2023)</ref></references>