Platypus Finance: Navigating DeFi Challenges

Martin Walker
Oct 13, 2023 at 08:51 am

The decentralized financial (DeFi) realm was recently shaken when Platypus Finance, a prominent DeFi protocol, fell victim to yet another cunning flash loan exploit, resulting in a staggering loss exceeding a whopping $2 million.

In a timely revelation on October 12th, PeckShield, a leading blockchain security firm, swiftly sounded the alarm, bringing the unfortunate incident to the attention of the community. Following this revelation, the platform, with an abundance of caution, opted to temporarily suspend all of its pools, signaling a necessary pause in its operations. A meticulous analysis of on-chain data pointed to a meticulous targeting of the AVAX-sAVAX liquidity pool by the perpetrators, further emphasizing the sophistication of the exploit.

As the investigation conducted by CertiK unraveled, it became apparent that two nefarious entities managed to make off with a considerable sum—approximately $1.3 million in wrapped AVAX (WAVAX) and an additional approximately $913,000 in liquid-staked AVAX (sAVAX), compounding the severity of the incident.

While the DeFi protocol diligently delves into the intricacies of this breach, the community remains on tenterhooks, eagerly awaiting a comprehensive post-mortem report and precise details regarding the extent of the digital assets pilfered. In the interim, they shared, "In light of the observed suspicious activities within our protocol, we have taken the prudent step of temporarily suspending all pools. We are committed to keeping our community informed with timely updates. Your patience and understanding during this challenging period are immensely appreciated."

Platypus, an Automated Market Maker (AMM) protocol strategically built to operate on the Avalanche blockchain, primarily centers its functionality on the seamless exchange of stablecoins, underscoring its pivotal role in the DeFi landscape. Notably, the platform had once secured a significant infusion of funding totaling $3.3 million during a well-crafted funding round, spearheaded by the reputable Three Arrows Capital in the year 2021. However, in a twist of fate, the same capital provider later declared bankruptcy, adding an unexpected twist to the narrative.

Regrettably, this recent exploit is not an isolated incident in the history of the protocol. Just earlier this year, in February, Platypus Finance bore the brunt of a staggering loss exceeding a substantial $8.5 million due to another flash loan attack. During this distressing event, the attackers ingeniously exploited a vulnerability within Platypus Finance's native stablecoin's USP solvency check mechanism, manipulating the smart contracts into falsely believing that USP was fully backed, further illustrating the need for robust security measures within DeFi protocols.

However, in a testament to resilience and dedication, by September, the tenacious team behind the DeFi protocol managed to successfully recover an impressive approximate of 61.7% of the initial losses suffered by their liquidity pools during the USP exploit, showcasing their relentless determination. They also diligently accessed a reserved treasury and initiated a second phase of recovery on September 26th, illustrating their commitment to restoring stability and trust within their community.

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