The Risk of Contract Upgrades: How Fuzzland Saved $2.8 Million from Hackers

In the fast-evolving world of decentralized finance (DeFi), smart contracts are the foundational elements driving innovation and growth. These contracts enable the creation of decentralized applications (dApps) that have the potential to revolutionize traditional finance. However, with the power to upgrade these smart contracts comes significant responsibility—and risk. In 2023 alone, over $1.7 billion was stolen from DeFi protocols, with many of these losses directly linked to vulnerabilities introduced during contract upgrades.

What is a Contract Upgrade?

A contract upgrade is the process of modifying an existing smart contract to add new features, fix bugs, or adapt to evolving needs. This capability is crucial for the continued development of dApps, allowing projects to stay ahead of the curve by enhancing their contracts over time. However, this flexibility can also introduce new vulnerabilities, as even minor changes can open up avenues for exploitation.

Proxy contracts are a common configuration which allow for ease of upgrading. This segments the data into two distinct contracts – a contract which holds the data (known as the proxy contract), and one which holds the business logic (known as the implementation contract). 

The Dangers of Contract Upgrades in DeFi

While contract upgrades are essential for innovation, they carry inherent risks. The ability to upgrade smart contracts can inadvertently create opportunities for exploitation, as seen in the recent incident involving AllianceBlock. Last month, attackers attempted to exploit a $2.8 million vulnerability in AllianceBlock’s upgraded smart contract which would have locked the funds permanently. Fortunately, the attack was foiled, and the funds were rescued, thanks to the diligent work of Fuzzland and the comprehensive Blaz+ product suite.

The AllianceBlock Incident: A Case Study

Following the Bonq DAO hack two years ago, AllianceBlock decided to upgrade one of its staking contracts to accept new tokens. While this upgrade was necessary for the protocol’s evolution, it introduced a critical vulnerability. The upgraded contract allowed for re-initialization, a process that should only happen once in a contract’s lifecycle. The “has initialized” flag variable was overwritten to “false” during the new update, allowing for an extra initialization.

Re-initialization enabled attackers to reset key parameters such as `rewardRate`, `rewardToken`, and `stakingToken`. By inflating the `rewardToken`, an attacker could stake a minuscule amount of tokens and, in return, receive an infinite amount of reward tokens. While the reward tokens are a governance token which doesn’t accrue monetary value, overwriting the staking token could lock all staked tokens. This exploit had the potential to block unstaking from the contract entirely, leading to a catastrophic loss of funds.

However, Fuzzland’s advanced security measures, powered by the Blaz+ suite, were in place. This suite of tools provided the necessary protection to identify and neutralize the threat before it could be fully exploited.

How the Blaz+ Suite Enhances Smart Contract Security

Fuzzland’s Blaz+ suite is a comprehensive set of tools designed to identify risks, alert you, and intervene before an attack can occur. The suite is comprised of three tools working in sync:

Blaz+ Analysis: 24/7 On-Chain Penetration Testing

Blaz+ Analysis offers an in-depth, continuous assessment of your smart contracts, providing 24/7 real-time monitoring and vulnerability assessment.

Blaz+ Alert: Customizable, Real-Time Alerts

Blaz+ Alert is designed to seamlessly integrate into your existing security workflows, offering customizable, real-time alerts that keep you informed of any changes in your risk profile. 

Blaz+ Mitigation: Proactive and Reactive Attack Intervention

Blaz+ Mitigation analyzes the mempool in real-time to identify and intercept potential threats. Leveraging advanced attack hijacking capabilities, mitigation front and back-run’s malicious activities. 

The Future of DeFi Security

The AllianceBlock incident is a powerful reminder of the risks associated with contract upgrades. However, it also underscores the importance of having the right security measures in place. As the DeFi space continues to grow, the need for reliable and innovative security solutions will only increase.

Fuzzland’s commitment to staying ahead of emerging threats ensures that their clients are well-protected against even the most sophisticated attacks. The Blaz+ suite is not just a set of tools; it’s a comprehensive security solution that enables projects to navigate the complexities of DeFi with confidence, knowing that their assets are secure.

About Fuzzland

Fuzzland is a leading innovator in smart contract security, dedicated to making the Web3 space safer and more reliable. Specializing in automated smart contract analysis, Fuzzland leverages advanced techniques such as AI, static analysis, fuzzing, and formal verification to identify and mitigate vulnerabilities in decentralized networks. Our platform has been instrumental in preventing high-profile security breaches, safeguarding millions in assets, and setting new standards in blockchain security. With a commitment to proactive security measures and continuous innovation, Fuzzland is at the forefront of protecting the next generation of decentralized finance and blockchain ecosystems. Follow Fuzzlands work and get in touch today: Website | X | LinkedIn