The Furucombo Hack: A $14 Million Lesson in Smart Contract Vulnerabilities

Introduction to the Furucombo DeFi Hack

On February 27, 2021, the decentralized finance (DeFi) world was shaken by a significant security breach targeting Furucombo, a popular DeFi aggregator. This incident resulted in a staggering loss of $14 million, serving as a stark reminder of the critical importance of robust smart contract security in the rapidly evolving blockchain ecosystem.

Understanding the "Evil Contract" Attack

The Furucombo hack was a sophisticated exploitation of smart contract vulnerabilities, specifically targeting the proxy contract mechanism. This "evil contract" attack demonstrated the potential dangers lurking within seemingly secure DeFi protocols.

Anatomy of the Exploit:

1. Proxy Contract Deception: The attacker tricked Furucombo's proxy contract into believing that Aave V2, a popular lending protocol, had implemented a new feature. In reality, this "new implementation" was a malicious contract controlled by the hacker.
2. Exploitation of Infinite Approvals: Many users had granted Furucombo "infinite approval" to interact with their tokens, a common practice in DeFi that became a critical vulnerability in this attack.
3. Token Transfer Manipulation: By exploiting the proxy contract's trust in the fake Aave V2 implementation, the attacker gained the ability to transfer all approved tokens to addresses under their control.
4. Delegatecall Vulnerability: The hack utilized the delegatecall function within the Furucombo proxy contract, allowing the attacker to execute malicious code in the context of the proxy and effectively control users' funds.

Impact and Aftermath of the Furucombo Hack

The consequences of the Furucombo hack were far-reaching, affecting both individual users and larger entities within the DeFi space:

• Individual users who had granted extensive permissions to Furucombo saw their wallets drained of various cryptocurrencies and tokens.
• Even Cream Finance, a prominent DeFi protocol, suffered losses as the attacker "borrowed" assets directly from their treasury.
• The stolen assets included a wide range of cryptocurrencies and tokens, such as stETH, USDC, USDT, DAI, aWBTC, aWETH, aETH, aAAVE, WBTC, CRV, LINK, and cETH, among others.

A Victim's Perspective: Lessons from the Furucombo Hack

One of the victims, a DeFi enthusiast known as Limzero, shared their experience, providing valuable insights into the real-time unfolding of the hack:

1. Limzero first learned about the attack through a Telegram channel, highlighting the importance of staying connected to crypto community channels for real-time updates.
2. Upon noticing unauthorized transfers from their address, Limzero quickly repaid active loans to prevent liquidation of their deposits.
3. Interestingly, the attacker only managed to drain a portion of Limzero's assets due to a low health factor, which inadvertently acted as a safeguard.
4. Limzero emphasized the critical importance of not using "infinite approve" unless there is absolute trust in the system, and recommended individual approvals for enhanced security.

Technical Analysis of the Furucombo Vulnerability

Expert analysis by Kurt Barry provided crucial insights into the technical aspects of the hack:

• Proxy Contract Manipulation: The attacker exploited the Furucombo proxy contract by designating the Aave V2 Lending Pool proxy as the handler for specific actions.
• Delegatecall Exploitation: By manipulating the delegatecall function, the attacker could modify storage within the Furucombo proxy, allowing them to set new addresses and transfer tokens at will.
• Bypassing Security Measures: The exploit managed to bypass Furucombo's whitelist functionality, which was intended to prevent such scenarios.

Strengthening DeFi Security: Lessons from Furucombo

The Furucombo hack serves as a crucial learning opportunity for the entire blockchain and DeFi community. Here are key takeaways and preventive measures:

1. Audit Delegatecall Functions: Developers must thoroughly audit how a delegatecallee's function can affect the caller's storage.
2. Restrict Callee Parameters: Implementing stricter controls on callee functions and parameters can limit potential attack vectors.
3. User Input Caution: Be extremely vigilant with user-provided input parameters, as they can be manipulated for malicious purposes.
4. Limited Approvals: Users should avoid granting infinite approvals to DeFi protocols and instead opt for limited, transaction-specific approvals.
5. Regular Security Audits: Protocols must conduct comprehensive and regular security audits, ensuring all components, including those from external integrations, are thoroughly examined.
6. Implement Reentrancy Guards: While not directly related to this hack, implementing robust reentrancy protection is crucial for preventing similar exploits in other contexts.
7. Community Vigilance: The crypto community plays a vital role in quickly identifying and reporting suspicious activities, as demonstrated by Limzero's experience.

Broader Implications for Blockchain and DeFi Security

The Furucombo hack underscores several critical points about the state of blockchain and DeFi security:

• Complexity of DeFi Protocols: As DeFi protocols become more intricate and interconnected, the potential for vulnerabilities increases exponentially.
• The Double-Edged Sword of Composability: While DeFi's composability is one of its strengths, it also introduces new attack surfaces that must be carefully secured.
• Importance of Comprehensive Audits: The hack revealed gaps in the auditing process, as the vulnerability was not part of the initial audit scope. This highlights the need for more thorough and holistic security assessments.
• User Education: The incident emphasizes the critical need for user education in DeFi, particularly regarding the risks of granting extensive permissions to protocols.
• Rapid Response Mechanisms: The quick identification and response to the hack demonstrate the importance of having robust monitoring and alert systems in place.

Conclusion: The Future of DeFi Security

The Furucombo hack serves as a stark reminder of the vulnerabilities that can exist even in seemingly secure DeFi protocols. It highlights the critical need for continuous improvement in smart contract security, comprehensive auditing processes, and user education in the blockchain space.

As the DeFi ecosystem continues to evolve and expand, the lessons learned from incidents like the Furucombo hack are invaluable. They drive the development of more robust security practices, encourage the creation of safer smart contracts, and ultimately contribute to building a more resilient and trustworthy decentralized financial system.

At Vidma Security, we specialize in smart contract auditing, penetration testing, and comprehensive blockchain security assessments. Our team of expert auditors and security researchers work tirelessly to identify and mitigate vulnerabilities before they can be exploited, helping to build a safer and more secure blockchain ecosystem for all. Learn more about our services and how we can protect your DeFi projects.