Cover Protocol Hack

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Cover Protocol

Cover protocol is a market for insurance, allowing you to protect your assets on other platforms against loss.

Except that the protocol itself got hacked, and there was nobody to insure it. Luckily, the firm which had conducted the breach owned up to it and gave the money back.

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

About Cover Protocol

Cover is "A peer-to-peer coverage market - A platform where you can buy coverage on anything." "COVER Protocol allows DeFi users to protect against smart contract risk. It stabilizes the turbulent DeFi space by instilling confidence and trust between protocols and their users. At the core of Cover Protocol are the fungible cover tokens. Fungible cover tokens are created when a user deposits collateral into a Cover smart contract. Each Cover contract specifies the protocol to be covered (ie Curve), the preferred collateral (ie DAI), the amount to deposit, and then the expiration date of coverage."

"The decentralized finance (DeFi) insurance project Cover Protocol was hacked earlier Monday in an infinite printing scheme, causing the price of the COVER token to plunge. Hours later, Grap.Finance, a “white hat hacker” claimed responsibility for the attack via their Twitter account, saying all funds had been returned."

"A hacker has exploited a bug in the incentives smart contract of Cover Protocol. This has allowed the hacker to get away with 11,761 COVER tokens, worth $3.62 million at press time."

"COVER (formerly known as SAFE) fell ~90% when an infinite mint loophole was uncovered and exploited, causing the total supply of tokens to increase by 48 quadrillion percent, from 84,477 to 40,796,131,214,802,600,000."

"The attackers managed to exploit a bug in the Cover’s incentive contract called infinite mining bug’." "They successfully discovered a process that gave them COVER tokens as rewards. They then staked, unstaked, and restaked LP tokens in rapid succession." "Nansen, an analyst group focused on Ethereum wallets revealed that the exploiter managed to carry on his exploits for over 2 hours and all of the $2 million stolen funds were minted token."

"Banteg, Yearn Finance’s core developer, commented on Twitter, saying that they are investigating the issue. Yearn Finance entered into a merger with Cover protocol on Nov.28. Binance has halted trading and deposits of Cover Protocol as well."

"“The 4350 ETH that has been returned by the attacker will also be handled through a snapshot to the LP token holders. We are still investigating,” according to the project’s Twitter account." "After claiming responsibility for the hack, the attacker sent a message telling Cover Protocol to “take care of your own shit.”"

"The Cover protocol has now come up with a compensation plan to refurbish those who were impacted by the exploit a couple of days ago. The team behind the defi insurance protocol released a medium post informing traders that the refurbishment plans would be based on the snapshot of block 11541218 which is the block before the first exploit took place."

"We will use the snapshot to calculate each user’s ownership percentage of all outstanding COVER-ETH LP tokens and distribute the ETH proportionally. We have received a total of 4,441.8 (4,350 + 1 + 90.8) ETH. The final distribution will be the total amount of ETH returned by exploiters to the dev multi-sig."

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.

Key Event Timeline - Cover Protocol Hack

Date	Event	Description
December 28th, 2020 12:00:00 AM	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Total Amount Lost

The total amount lost has been estimated at $9,400,000 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

The total amount recovered has been estimated at $3,696,000 USD.

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?

Prevention Policies

The decentralized finance space is still new and developing.

It is essentially impossible to prove that a smart contract is secure. More secure storage of funds involve multi-signature offline storage.