Merlin Labs Profit Inflation Vulnerability: Difference between revisions
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{{Imported Case Study 2|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}} | {{Imported Case Study 2|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}} | ||
{{Unattributed Sources}} | {{Unattributed Sources}} | ||
[[File:Merlinlab.jpg|thumb|Merlin Labs]] | |||
The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado. | [[File:Merlinlab.jpg|thumb|Merlin Labs]]The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado. | ||
As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck. | As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck. | ||
This is a global/international case not involving a specific country.<ref name="blockthreat-2673" /><ref name="peckshieldtwitter-2789" /><ref name="rektnews-2790" /><ref name="reddit-2791" /><ref name="decremist-2792" /><ref name="reddit-2793" /><ref name="vikingswapfinance-1141" /><ref name="openblocksecgithub-2342" /><ref name="bscscan-2794" /><ref name=" | This is a global/international case not involving a specific country.<ref name="blockthreat-2673" /><ref name="peckshieldtwitter-2789" /><ref name="rektnews-2790" /><ref name="reddit-2791" /><ref name="decremist-2792" /><ref name="reddit-2793" /><ref name="vikingswapfinance-1141" /><ref name="openblocksecgithub-2342" /><ref name="bscscan-2794" /><ref name="unnamed-12515" /><ref name="rektnews-6296" /><ref name="blockthreat-6297" /> | ||
== About Merlin Labs == | == About Merlin Labs == | ||
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<ref name="bscscan-2794">[https://bscscan.com/address/0x2bADa393e53D0373788d15fD98CB5Fb1441645BD Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD | BscScan] (Aug 29, 2021)</ref> | <ref name="bscscan-2794">[https://bscscan.com/address/0x2bADa393e53D0373788d15fD98CB5Fb1441645BD Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD | BscScan] (Aug 29, 2021)</ref> | ||
<ref name=" | <ref name="unnamed-12515">[https://medium.com/@nelsonblue41/introduction-to-merlin-d489a40cf4d6 https://medium.com/@nelsonblue41/introduction-to-merlin-d489a40cf4d6] (Nov 30, 2023)</ref> | ||
<ref name="rektnews-6296">[https://rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Feb 8, 2022)</ref> | <ref name="rektnews-6296">[https://rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Feb 8, 2022)</ref> | ||
<ref name="blockthreat-6297">[https://www.blockthreat.io/p/blockthreat-week-26-2021 https://www.blockthreat.io/p/blockthreat-week-26-2021] (Feb 8, 2022)</ref></references> | <ref name="blockthreat-6297">[https://www.blockthreat.io/p/blockthreat-week-26-2021 https://www.blockthreat.io/p/blockthreat-week-26-2021] (Feb 8, 2022)</ref></references> | ||
Revision as of 15:16, 30 November 2023
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The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.
As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.
This is a global/international case not involving a specific country.[1][2][3][4][5][6][7][8][9][10][11][12]
About Merlin Labs
"Merlin Lab is the highest APY auto-compounding yield aggregator on BSC." Merlin is a way to "Auto-compound & Earn BTCB, ETH, BNB & extra MERL." "Merlin Lab’s vision is to create a suite of complementary DeFi products that will operate in a harmonious ecosystem."
"User security has always been Merlin Lab’s top priority." "It has been always a top priority and it is for the simple reason that without security the platform can't be run." "Our development team has implemented routine checks of our smart contracts and codes to continuously bring improved security standards into the Merlin ecosystem." "Merlin Labs was audited by Hacken on May 15th." "According to the assessment, the Customer's smart contracts are well-secured." "Our team performed an analysis of code functionality, manual audit, and automated checks with Mythril and Slither."
"On June 29, 2021 Merlin profit inflation vulnerability was exploited which resulted in the loss of $330K."
"The third time’s a charm for Merlin Finance. Why do people keep going back?"
"A total of $330k was stolen, bringing their TVL (total value lost) to $1,560,000, and putting them on par with Value DeFi as one of the few protocols to be so unsafe that they have three positions onto the rekt leaderboard."
"Thank you for your patience. It has been identified that this was an economic exploit."
"The Merlin Dev team had deployed the Alpaca single asset vaults onto the Mainnet for testing this morning. This vault was not supposed to be publicly available or ready to launch to the public."
"Via the smart contract, a hacker deposited 0.1WBNB into the vault and then manually transferred 1000BNB into the contract to trick the contract into thinking it has received 1000BNB in rewards, which resulted in the minter producing MERL rewards."
"Merlin's reward system gave users Merlin tokens for every $ in performance fees they brought in. It was rewarding 35 MERL (~$500 at the time) for every BNB (worth ~$300). When calculating the profit of the strategy, it converted the received BNB to WBNB. The increase in WBNB balance was then seen as the profit. By sending BNB to the contract directly, it is also converted to WBNB and considered "profit". By depositing BNB in the contract, the attacker could harvest and all that BNB would be assumed to be rewardable profit. Straight to ETH, then Tornado and it’s gone."
"Merlin is officially closed."
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.
| Date | Event | Description |
|---|---|---|
| June 29th, 2021 | Main Event | Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here. |
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 $330,000 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?
General Prevention Policies
It is impossible to prove that smart contracts are completely secure, and they should be treated in a similar manner to hot wallets. The majority of funds should be stored in multi-signature wallets with offline keys.
Smart contract hot wallets can improve security through third party security auditing, or providing a bug bounty. Keep funds in the hot wallet minimal and expect losses. Smart contract insurance, setting up a self insurance treasury, or an industry insurance fund may also be possible, which could allow for greater live liquidity.
Individual Prevention Policies
No specific policies for individual prevention have yet been identified in this case.
For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.
Platform Prevention Policies
Policies for platforms to take to prevent this situation have not yet been selected in this case.
For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.
Regulatory Prevention Policies
No specific regulatory policies have yet been identified in this case.
For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.
References
- ↑ No Title (Jul 24, 2021)
- ↑ @peckshield Twitter (Jul 24, 2021)
- ↑ Rekt - Merlin Labs - R3KT (Jul 24, 2021)
- ↑ Reddit - Dive into anything (Jul 24, 2021)
- ↑ Merlinlab flash loans and Upgraded Security Strategy (Jul 24, 2021)
- ↑ Reddit - Dive into anything (Jul 24, 2021)
- ↑ VIking Swap Audit - Hacken (Jun 13, 2021)
- ↑ blocksec-incidents/2021.md at main · openblocksec/blocksec-incidents · GitHub (Aug 11, 2021)
- ↑ Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD | BscScan (Aug 29, 2021)
- ↑ https://medium.com/@nelsonblue41/introduction-to-merlin-d489a40cf4d6 (Nov 30, 2023)
- ↑ Rekt - Merlin Labs - R3KT (Feb 8, 2022)
- ↑ https://www.blockthreat.io/p/blockthreat-week-26-2021 (Feb 8, 2022)