The Belt Finance Exploit: A $6.3M Flash Loan Attack on BSC

The Binance Smart Chain's Vulnerability Exposed

On Saturday, May 29, 2021, the decentralized finance (DeFi) ecosystem witnessed yet another significant security breach. This time, the victim was Belt Finance, a yield optimization protocol operating on the Binance Smart Chain (BSC). The attack resulted in a staggering loss of $6.3 million, highlighting the persistent vulnerabilities in the rapidly evolving DeFi landscape.

Anatomy of the Attack: A Sophisticated Flash Loan Exploit

The Belt Finance hack was a masterclass in exploiting smart contract vulnerabilities, demonstrating the attacker's deep understanding of DeFi mechanics and smart contract interactions. Let's break down the key components of this sophisticated attack:

1. Flash Loan Initiation

The attacker began by taking out multiple flash loans, totaling an enormous 385 million BUSD from PancakeSwap. Flash loans allow users to borrow large amounts of cryptocurrency without collateral, provided they repay the loan within the same transaction block.

2. Strategic Fund Deposits

With the borrowed funds, the attacker made strategic deposits into two of Belt Finance's yield-generating strategies:

These deposits were crucial in setting up the subsequent steps of the exploit.

3. Currency Swaps and Manipulations

The attacker then performed a series of BUSD/USDT swaps via Ellipsis, a decentralized exchange on BSC. This step was likely aimed at manipulating asset prices or creating arbitrage opportunities.

4. Exploit Execution and Profit Extraction

By repeating specific steps and leveraging the manipulated asset valuations, the attacker was able to withdraw more funds than they should have been entitled to. This discrepancy between deposited and withdrawn amounts resulted in the $6.3 million profit for the attacker.

The Root Cause: Incorrect Share Valuation

At the heart of this exploit lay a critical flaw in Belt Finance's smart contracts: an incorrect valuation of shares within the protocol. This miscalculation allowed the attacker to game the system, extracting more value than they put in.

Expert Insights and Analysis

The DeFi community quickly rallied to analyze the attack, with several experts offering their insights:

FrankResearcher's Observations

FrankResearcher, a prominent blockchain security researcher, provided a detailed breakdown of the attack, highlighting the step-by-step process the attacker used to exploit the vulnerability.

Mudit Gupta's Analysis

Mudit Gupta, another respected voice in the blockchain security space, also weighed in on the incident. His analysis focused on the technical aspects of the exploit and potential preventive measures.

Similarities to Past Exploits: A Recurring Theme?

Interestingly, the Belt Finance hack bore striking similarities to a previous exploit on Harvest Finance in October 2020. This parallel raised questions about whether the same individuals or groups might be behind both attacks, or if there's a broader pattern of vulnerabilities in DeFi protocols that attackers are systematically exploiting.

Impact on the DeFi Ecosystem

The Belt Finance hack had ripple effects across the DeFi ecosystem:

Lessons Learned and Preventive Measures

The Belt Finance exploit serves as a stark reminder of the importance of robust security measures in DeFi. Here are some key takeaways and preventive strategies:

1. Thorough Auditing

While Belt Finance had undergone security audits, this incident highlights the need for continuous and comprehensive auditing processes. Audits should not be one-time events but ongoing processes that adapt to the evolving DeFi landscape.

2. Multi-layered Security Approach

Implementing multiple layers of security, including formal verification, bug bounties, and gradual rollouts of new features, can help catch vulnerabilities before they're exploited.

3. Price Oracle Diversification

Many DeFi hacks, including this one, exploit vulnerabilities in price oracles. Using multiple, decentralized price oracles can mitigate the risk of price manipulation attacks.

4. Smart Contract Upgradability

Implementing upgradable smart contracts allows protocols to quickly patch vulnerabilities when discovered. However, this must be balanced with the risks associated with centralized control.

5. Community Vigilance

Encouraging and incentivizing the community to report suspicious activities or potential vulnerabilities can serve as an additional layer of security.

The Road Ahead: Strengthening DeFi Security

The Belt Finance hack serves as a critical reminder of the ongoing security challenges in the DeFi space. As the industry continues to innovate and grow, it must prioritize security to build trust and ensure long-term sustainability.

For projects looking to enhance their smart contract security and protect against similar exploits, partnering with experienced blockchain security firms is crucial. Vidma Security, a leader in blockchain security audits, offers comprehensive smart contract auditing services across various DeFi protocols, layer one solutions, and more. With expertise in penetration testing and vulnerability assessments, Vidma helps projects identify and address potential security risks before they can be exploited. To learn more about how Vidma can help secure your blockchain project, visit https://www.vidma.io.