1inch, a decentralized exchange aggregator, was the target of a critical breach in its smart contracts last week, resulting in the theft of $5 million. However, following negotiations with the hacker responsible for the attack, the exchange managed to successfully recover most of the stolen funds.
The incident occurred on March 5, with investigators attributing the breach to a vulnerability in an outdated version of 1inch’s smart contract. After discussions and the offering of a bug bounty, the attacker returned the majority of the stolen funds, keeping a portion as a bug bounty as per WuBlockchain’s report, citing Decurity’s postmortem analysis.
The breach was caused by a flaw in the Fusion v1 resolver smart contract, which was identified as an obsolete component of the platform. The 1inch team detected the incident around 6 PM UTC on March 5, due to attackers exploiting outdated logic within Fusion v1 to execute unauthorized transactions.
Fortunately, no end users were directly impacted by the breach, as it targeted a third-party market maker, TrustedVolumes. In response, 1inch promptly redeployed its resolver contracts as a precautionary measure to prevent further exploits.
The hacker involved in the attack initiated communication through an on-chain message, requesting a bug bounty in exchange for returning the stolen funds. Negotiations with TrustedVolumes led to a successful resolution, showcasing a rare instance of a DeFi exploit resulting in the voluntary return of stolen assets, reflecting a trend towards ethical hacking and white hat negotiations in the DeFi industry.
This incident marks the second security breach 1inch has faced in six months, with a previous compromise in October 2024 due to a front-end attack. It underscores the ongoing security challenges within the DeFi ecosystem, emphasizing the importance of continuous monitoring and rapid response mechanisms to protect users and assets.
Despite the recovery, the price of 1inch has only risen by a modest 1.12% since the incident, trading at $0.23 at the time of this writing. The incident underscores the significance of ongoing smart contract audits, proactive vulnerability detection, and stronger validation mechanisms to prevent similar breaches in the future.
In conclusion, the 1inch breach and subsequent recovery serve as a reminder of the evolving security landscape in decentralized finance and the importance of robust security measures to protect against unauthorized access and theft in the DeFi space.