THORChain ERC-20 Router Exploit hack — July 2021

On 23 July 2021 an attacker took roughly $8 million of ERC-20 assets from THORChain's Ethereum router. It was the second successful exploit of that component in eight days and the third incident to hit the cross-chain liquidity protocol in under a month, after a roughly $140,000 loss in late June.

THORChain's Bifrost service watches the Ethereum router for deposit events and mirrors them into the network. The attacker deployed a fake router contract that emitted a deposit event carrying a malformed memo and designated the attacker's own contract as an Asgard vault. Because Bifrost could not parse the memo, it fell through to its refund logic and returned real vault assets to the address the forged event named. THORChain's post-mortem describes the Bifrost code involved as unaudited: the state machine and BNB Bifrost had been audited, but the updated multi-chain state machine and its new Bifrosts had not. SlowMist's analysis of the transaction lists the assets taken as 1,672,794 USDC, 990,137 USDT, 20,866,664 XRUNE, 56,104 SUSHI, 966.62 ALCX and 6.91 YFI.

The attacker embedded a message in the transaction saying they had deliberately limited the damage, that they could also have taken BTC, BNB and BEP-20 assets, and warning the team not to rush code that secures nine figures. Reporting at the time said the attacker asked for a 10% bounty. Contemporaneous reporting does not record the funds being returned.

The network was halted. THORChain put the combined insolvency from both router exploits at about $16 million and said it would cover it in three roughly equal parts of about $5.3 million each: a direct contribution from treasury assets, a loan from Iron Bank against RUNE collateral, and arbitrage once trading resumed. Liquidity providers in the affected ERC-20 pools were subsidised.