Skip to main content
SpringerLink
Log in

How to Exploit a DeFi Project

  • Conference paper
  • First Online:
Financial Cryptography and Data Security. FC 2021 International Workshops (FC 2021)

Part of the book series: Lecture Notes in Computer Science ((LNSC,volume 12676))

Included in the following conference series:

Abstract

The growing adoption of decentralized finance poses new security risks, as designing increasingly complex financial models is error-prone. We have witnessed numerous DeFi projects hacked (for tens of millions of dollars) because of unsound liquidation conditions, asset pricing, or position management, etc. To address these issues, we present a systematic way of finding vulnerabilities in DeFi projects based on automatically extracting financial models from smart contracts and reasoning about them symbolically using either a model checker or an interactive theorem prover. Specifically, we (i) formalized the concept of soundness in the financial model of a DeFi project which captures an interesting class of exploits (flash-loan attacks), and (ii) built a domain-specific language to automatically extract models from smart contracts and search possible exploits or prove their soundness. To demonstrate the capability of our approach, we model variants of most DeFi projects with a TVL (total value locked) larger than 20M USD (totaling about 8B USD TVL) and check their soundness. The result showed that we can automatically find both previous exploits and potential new flaws in DeFi.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 99.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 129.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    see appendix A.

  2. 2.

    the bZx attack on Feb.15th, 2020, shown in appendix A.

References

  1. Daian, P., et al.: Flash boys 2.0: Frontrunning, transaction reordering, and consensus instability in decentralized exchanges. arXiv preprint arXiv:1904.05234 (2019)

  2. Georgiev, G.: Yam finance crashes over 90%, founder admits his failure (2020). https://cryptopotato.com/yam-finance-crashes-over-90-founder-admits-his-failure/

  3. Hajdu, Á., Jovanović, D.: Solc-verify: a modular verifier for solidity smart contracts. arXiv preprint arXiv:1907.04262 (2019)

  4. Luu, L., Chu, D.H., Olickel, H., Saxena, P., Hobor, A.: Making smart contracts smarter. In: Proceedings of the 2016 ACM SIGSAC Conference on Computer and Communications Security, pp. 254–269. ACM (2016)

    Google Scholar 

  5. Permenev, A., Dimitrov, D., Tsankov, P., Drachsler-Cohen, D., Vechev, M.: Verx: Safety verification of smart contracts. Security and Privacy 2020 (2019)

    Google Scholar 

  6. Riley, D.: \$25m in cryptocurrency stolen in hack of lendf.me and uniswap (2020). https://siliconangle.com/2020/04/19/25m-cryptocurrency-stolen-hack-lendf-uniswap/

  7. Seshia, S.A., Subramanyan, P.: Uclid 5: Integrating modeling, verification, synthesis and learning. In: 2018 16th ACM/IEEE International Conference on Formal Methods and Models for System Design (MEMOCODE). pp. 1–10, October 2018. https://doi.org/10.1109/MEMCOD.2018.8556946

  8. Sjöberg, V., Sang, Y., Weng, S.c., Shao, Z.: Deepsea: a language for certified system software. In: Proceedings of the ACM on Programming Languages 3(OOPSLA), pp. 1–27 (2019)

    Google Scholar 

  9. Team, A.: Aave developers doc (2020). https://docs.aave.com/developers/

  10. Wang, Yuepeng, et al.: Formal verification of workflow policies for smart contracts in azure blockchain. In: Chakraborty, Supratik, Navas, Jorge A.. (eds.) VSTTE 2019. LNCS, vol. 12031, pp. 87–106. Springer, Cham (2020). https://doi.org/10.1007/978-3-030-41600-3_7

    Chapter  Google Scholar 

  11. Williams, M.: Rising defi protocol balancer loses \$500,000 to hacker in pool exploit (updated) (2020). https://www.bitcoininsider.org/article/89413/rising-defi-protocol-balancer-loses-500000-hacker-pool-exploit-updated

  12. Zhou, L., Qin, K., Cully, A., Livshits, B., Gervais, A.: On the just-in-time discovery of profit-generating transactions in defi protocols. arXiv preprint arXiv:2103.02228 (2021)

Download references

Acknowledgement

We would like to acknowledge the contribution of many colleagues on various related projects at CertiK, especially Ronghui Gu, Dan She, Jialiang Chang, Junhong Chen and Zhaozhong Ni.

Author information

Authors and Affiliations

  1. CertiK, New York, NY, 10018, USA

    Xinyuan Sun, Vilhelm Sjöberg & Jay Jie

  2. University of California, Berkeley, Berkeley, CA, 94720, USA

    Shaokai Lin

Authors
  1. Xinyuan Sun
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Shaokai Lin
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Vilhelm Sjöberg
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Jay Jie
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Xinyuan Sun .

Editor information

Editors and Affiliations

  1. University of Michigan–Ann Arbor, Ann Arbor, MI, USA

    Matthew Bernhard

  2. Computer Science and Mathematics, Stirling University, Stirling, UK

    Andrea Bracciali

  3. Imperial College London, London, UK

    Lewis Gudgeon

  4. Norwegian University of Science and Technology, Trondheim, Norway

    Thomas Haines

  5. Ithaca College, Ithaca, USA

    Ariah Klages-Mundt

  6. Department of Computer Science, Georgetown University, Washington, WA, USA

    Shin'ichiro Matsuo

  7. Imperial College London, London, UK

    Daniel Perez

  8. Dipartimento di Matematica, University of Trento, Trento, Trento, Italy

    Massimiliano Sala

  9. Imperial College London, London, UK

    Sam Werner

A Past Exploits on DeFi Projects

A Past Exploits on DeFi Projects

Table 1. Exploits on DeFi projects happened in 2020
Full size table

Rights and permissions

Reprints and permissions

Copyright information

© 2021 International Financial Cryptography Association

About this paper

Check for updates. Verify currency and authenticity via CrossMark

Cite this paper

Sun, X., Lin, S., Sjöberg, V., Jie, J. (2021). How to Exploit a DeFi Project. In: Bernhard, M., et al. Financial Cryptography and Data Security. FC 2021 International Workshops. FC 2021. Lecture Notes in Computer Science(), vol 12676. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-63958-0_14

Download citation

  • DOI: https://doi.org/10.1007/978-3-662-63958-0_14

  • Published:

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-662-63957-3

  • Online ISBN: 978-3-662-63958-0

  • eBook Packages: Computer ScienceComputer Science (R0)

Publish with us

Policies and ethics

Search

Navigation