Decentralized finance protocol Abracadabra Finance has suffered a major exploit discovered earlier today, leading to a loss of approximately $6.5 million in user funds. Magic Internet Money (MIM), the algorithmic stablecoin issued by the protocol, crashed to $0.76 following the exploit.

According to an initial disclosure published by blockchain security firm PeckShield at 5:36 AM EST, the threat actors behind the attack targeted a vulnerability in Abracadabra’s lending and borrowing smart contracts.

These smart contracts govern the Magic Internet Money stablecoin. The attackers bypassed an insolvency check because of a precision loss bug that occurs when collateral amounts are placed from a transaction. The bug then enabled the attackers to take out a highly inflated MIM loan relative to the collateral deposited.

News of the attack quickly crushed confidence in the MIM stablecoin, causing it to lose parity below $0.7 before gradually recovering to $0.96 within the day.

PeckShield notes that the attacker funded the exploit using Tornado Cash, a currently sanctioned crypto mixing protocol.

In an initial analysis, Certik, another blockchain security auditor, suggested that the MIM exploit could stem from a rounding error in the stablecoin’s minting or burning process. Abracadabra uses interest-bearing collateral to algorithmica

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Author: Vince Dioquino

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