- Solana is down 13.5% today.
- SOL tanked on the news that $322 million had been stolen from the Wormhole bridge.
- The Wormhole team says that it will be replacing the stolen ETH.
Share this article
Solana has taken a hit following last night’s a $322 million hack on its Wormhole bridge. SOL has dipped amid uncertainty about the backing of wETH on the bridge.
Wormhole Hack Leads to Solana Dip
Solana is trending down again.
SOL has dipped by more than 13.5% in the last 24 hours, triggered by the news of a $322 million hack on the Wormhole bridge.
A vulnerability in the Ethereum-compatible cross-chain bridge allowed a hacker to drain 120,000 ETH locked on the Ethereum-facing smart contract at around 18:24 UTC last night. SOL was trading at $111 when the news of the hack surfaced and has plunged to $96 today.
The Wormhole bridge lets users transfer ETH from Ethereum to Solana. To use ETH on Solana, users can lock it in a smart contract and receive a pegged asset called Wormhole ETH (wETH). This asset can be used across Solana’s DeFi ecosystem.
The hacker executed an unauthorized mint of 120,000 wETH worth about $322 million. They executed the attack by exploiting a bug related to Solana VAA, a bridge function to verify asset transfers.
The hacker then transferred 93,750 wETH back to Ethereum, claimed it and moved into their wallet. They then swapped the remaining 26,250 for 432,662 SOL and have left the funds sitting in their wallet on Solana.
The Potential Impact on The Solana Ecosystem
While the Wormhole hack was not a direct hack on the Solana network, the incident could have a negative impact on the ecosystem. This is primarily because the ETH that helps collateralize the peg of wETH is missing following the hack. As a result, 120 million wETH is circulating on Solana and currently in use across DeFi applications without any real backing. Permanent absence of the ETH backing wETH could affect collateralized token loans on Solana-based lending protocols such as Solend.
If the 1:1 backing of wETH is not quickly replenished, it could trigger a situation where DeFi positions may become undercollateralized and potentially fuel a bank run. Such a situation would add to Solana’s well-documented difficulties after it has suffered from multiple clogs due to bot attacks on the network over the last few months.
The wormhole network was exploited for 120k wETH.
ETH will be added over the next hours to ensure wETH is backed 1:1. More details to come shortly.
We are working to get the network back up quickly. Thanks for your patience.
— Wormhole🌪 (@wormholecrypto) February 2, 2022
In a Wednesday tweet announcing the hack, Wormhole said it would replace the missing ETH on the bridge to “ensure wETH is backed 1:1”. However, it did not specify where it would get the $322 million supply from. The Wormhole team has since patched the vulnerability.
Disclosure: At the time of writing, the author of this piece owned ETH and SOL.
Wormhole Bridge Attacked for $322M
An attacker has exploited the bridge protocol Wormhole for $322 million of ETH, according to various reports. Attack Estimated Above 120,000 ETH Wormhole has placed the value of the attack…
Is Time on our Side? The Case for Bitcoin’s Lengthening Cycles
One of the many unique features of BTC is its halving process, which is often accompanied by a bullish movement and preceded by bearish consolidation. Bitcoin’s halving events have been…
Latest Solana Clog Causes Liquidation Bloodbath
Solana has faced more network issues, this time during a major market downturn. Solana DeFi Users Liquidated Due to Congestion Solana DeFi users were among the hardest hit in this…
Solana Looks to Incorporate Fee Market Akin to Ethereum
Solana Labs CEO Anatoly Yakovenko has put forward a proposal to introduce a fee market on Solana. The move aims to disincentivize spam transactions while also helping users get urgent…