Decentralized exchange Velocore, operating on multiple blockchain networks, recently fell victim to a sophisticated hack, resulting in a loss of approximately $6.8 million in tokens. The exploit targeted a vulnerability in the smart contracts governing its liquidity pools, allowing the hacker to manipulate the system and drain funds from Velocore's "volatile pools" on two of its supported blockchains, zkSync Era and Linea.

In a detailed post-mortem analysis, Velocore revealed that the hacker exploited an overflow logic vulnerability, tricking the system into converting a small withdrawal into a substantial deposit. The hacker then utilized a flash loan to maximize the damage, leaving Velocore's users with significant losses. However, the team acted swiftly to safeguard its assets on the Telos blockchain and ensured that "stable pools" remained unaffected.

Velocore's response to the incident has been swift and transparent, with the team apologizing to its users and taking immediate action to rectify the situation. The vulnerable logic flaw has been disabled, preventing potential copycat attacks. Additionally, Velocore has extended an olive branch to the hacker, offering a 10% white hat bounty for the return of the remaining funds by June 3. Although the hacker has yet to respond, they have deposited a portion of the stolen funds, approximately 1700 eth (worth around $7 million), into cryptocurrency mixer Tornado Cash.

In the aftermath of the attack, the Linea Ethereum Layer 2 network, built by ConsenSys, temporarily paused its block production in an attempt to mitigate the losses. This decision was made to protect users on Linea, as other avenues to address the exploit were exhausted. Linea defended its actions, stating that while its goal is to achieve significant decentralization and remove the ability to halt the network, it must prioritize the protection of its ecosystem participants.

Velocore has committed to implementing an appropriate compensation plan to address the losses incurred by its users once operations resume. The team has taken a snapshot of the blockchain state prior to the incident, ensuring that affected users will be supported. As the decentralized exchange works to rebound from this setback, its response serves as a testament to the importance of transparency, swift action, and user protection in the crypto space