Terra’s Mirror protocol allegedly suffered second exploit and on verge of collapse, analyst says

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Mirror protocol, a Terra Classic blockchain-based decentralized finance platform, is in the middle of an exploit that has seen around $2 million drained from several liquidity pools. Hackers have been taking advantage of a bug in the protocol’s price oracle that is misreporting the price of LUNC.

Mirror Protocol allows users to trade tech and stock derivatives and other digital currencies through synthetic assets. The pools that have been drained so far are the protocol’s wrapped versions of BTC, Ethereum, Polkadot, and Galaxy Digital stocks.

However, according to “FatMan,” a pseudonymous analyst that has spoken up about the exploit, the protocol may collapse finally as the developers do not appear to be taking any action. In a tweet, FatMan stated that the exploit has so far been limited by the fact that the stock derivatives do not trade over the weekend.

Mirror Protocol is being exploited again as we speak, and the devs are completely MIA. So far, the attacker has drained over $2m and counting – the attack will get worse when markets open tomorrow unless the dev team steps in and fixes the price oracle. @mirror_protocol (1/4)

— FatMan (@FatManTerra) May 30, 2022

“It looks like nothing will be done and the project will collapse tomorrow for sure (there are other vectors too), so get all your money out of Mirror right now. Tell anyone who has money in Mirror to withdraw and sell their assets. Pretty soon there will be nothing left,” the analyst said.

However, Todd Garrison, the founder of Blockpane and a digital currency security enthusiast, has stated that the exploit can be stopped if all Terra Classic validators update the price oracle of their nodes.

He explained that at the moment, the validators running the older version of the price oracle are reporting the price of the rechristened LUNA token on Terra 2.0 instead of LUNC. As a result, instead of a few cents, LUNC is being reported to be worth around $5.

This is because a majority of the #TerraClassic #LUNC validators are running an outdated version of the price oracle! You can see who is publishing bad prices here https://t.co/cKM9V1VbPh if they have a low missed-oracle vote count they need to update ASAP!!! https://t.co/h5GBrg3UGe

— Todd G | block pane (@blockpane) May 30, 2022

Terra’s credibility is still under questions

This has not been the only exploit to occur on Mirror Protocol. FatMan also recently identified a similar exploit on the protocol that lost around $90 million. This exploit occurred about seven months ago but has flown under the radar until the Terra blockchain started getting more scrutiny following its unraveling.

The Terra blockchain has been the focus of a lot of attention since its algorithmic stablecoin, UST, with a market capitalization of around $41 billion, crashed to near zero. The plunge dragged down the price of LUNA with it, leading to severe losses for investors.

Asides from on-chain scrutiny, regulators and law enforcement have also been looking to identify any foul play in the event. Much of the legal pressure is coming from South Korea.

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