Key Takeaways
- LeetSwap stated that it is collaborating with on-chain security experts to attempt to recover the locked liquidity and identify the source of the exploit
- The team noticed unusual activity, indicating that pool liquidity might have been tampered. Consequently, the exchange took swift action and temporarily suspended trading to prevent further losses.
LeetSwap, the largest decentralized exchange (DEX) on the Base chain, has recently suspended all transactions on its platform following concerns of a potential hack. The exchange suspects that several liquidity pools may have been compromised, leading to a temporary halt in trading to conduct a thorough investigation.
As reported by LeetSwap on Twitter, their DEX is based on the Solidly protocol, which includes a security pause function. The team noticed unusual activity, indicating that pool liquidity might have been tampered with. Consequently, the exchange took swift action and temporarily suspended trading to prevent further losses and assess the extent of the breach.
The incident occurred after the launch of a new token called “bald” (BALD) on the Base blockchain, which initially saw a meteoric rise in value but later plummeted by as much as 90% due to the removal of significant liquidity by the token’s deployer.
The volatility surrounding BALD further exacerbated the situation, causing a 5.4% drop in the price of LeetSwap’s native token, LEET, immediately following the exchange’s announcement.
To address the security breach, LeetSwap stated that it is collaborating with on-chain security experts to attempt to recover the locked liquidity and identify the source of the exploit. Although specific details were not disclosed, blockchain analysts and experts in the field have provided some insights into how the attack likely occurred.
Igor Igamberdiev, the research head of algorithmic market maker Wintermute, believes that the attacker exploited an exposed smart contract function. This enabled the malicious actor to manipulate the price of a token, leading to the draining of wrapped Ether from LeetSwap’s liquidity pools. According to Igamberdiev’s estimates, the attacker managed to siphon off 342.5 ETH, valued at over $630,000.
Confirmation of this theory and the amount exploited came from multiple reputable blockchain security firms, including PeckShield, Beosin, BlockSec, and CertiK. Their tweets supported Igamberdiev’s analysis, adding credibility to the investigation.
LeetSwap’s emergence as a major exchange took place only a few days before the introduction of the memecoin BALD to the Base ecosystem. The token’s staggering rise in value quickly drew attention from users amid an otherwise lackluster market with few positive fluctuations.
Base, developed by cryptocurrency exchange Coinbase on OP Stack, launched its testnet in January and opened to developers in mid-July following the submission of applications to Base.
Data from DeFiLlama revealed that LeetSwap’s total value locked (TVL) reached an impressive $41.2 million on July 31. However, after the suspected hack and subsequent market uncertainty, the TVL has plummeted to $7 million as of August 1.
