What Went Wrong at Hyperdrive?

On a Saturday night, Hyperdrive, a lending protocol, was breached. The wallet drained around $782,000 from their router smart contract. The fix? Pausing the protocol and fixing the issue.

How do we make sense of this?

The exploit does not surprise because Hyperliquid is a relatively new Layer 1. This makes them susceptible to vulnerabilities. But, unlike many of its predecessors, Hyperliquid has been scrutinized by the community.

Users had posted about the vulnerability on Discord last week, and so it ultimately raised the question of whether the exploit was planned or opportunistic. The reality of the situation is that even the most scrutinized protocols can be brought down.

The attacker drained two pools (the Primary USDT0 Market and the Treasury USDT Market) of 673,000 USDT0 stablecoins and 110,244 thBILL tokens. They converted these funds into BNB and ETH, then moved them off-chain.

It raises many questions:

Are fintech startups in Asia and crypto-friendly SMEs taking the right precautions to safeguard against exploits like the one seen with Hyperdrive? What are the key measures that could be implemented? Furthermore, are users becoming too complacent about the security risks associated with crypto platforms? If so, how can this complacency be addressed? And finally, what role should regulatory bodies play in the prevention of similar exploits in the future?

Here’s a breakdown of these questions.

What Steps Should Fintech Startups Take?

It’s a hard reality that exploits like Hyperdrive’s can impact any protocol. Fintech startups in Asia can bolster their security by ensuring:

Conducting comprehensive smart contract audits from multiple firms.
Implementing robust permission controls.
Installing systems for real-time transaction monitoring.
Having a clear incident response plan.
Ensuring regulatory compliance.

These considerations could help prevent some of the damage.

What Should Crypto-Friendly SMEs Consider?

Yes, and yes. Crypto-friendly SMEs should improve their security measures by implementing

Granular permission models.
Full security audits.
Pausing operations in case of suspicious transactions.
Advanced fraud prevention technologies.
Transparent communication during incidents.
Keeping software up-to-date to patch vulnerabilities.
Regularly backing up data and employing encryption.

Why Are Users Less Attentive to Security?

The DeFi space is filled with tutorials and guides. But many users forget that security risks extend beyond simple smart contract bugs. Users are also at risk of scams and deception.

This complacency can be reversed through