The Cronos blockchain recently made the decision to temporarily suspend its activities following a hacking attempt that led to a theft of nearly $75 million from the Tectonic lending protocol. Although the associated application and exchange with Crypto.com were not affected, this incident raises important questions about the security and reliability of decentralized finance (DeFi) protocols on Cronos.
The current situation on the Cronos blockchain
Last Sunday, the validators of the Cronos blockchain reacted quickly by detecting a hack on the Tectonic protocol. This operation led to the halting of block production on the network, preventing funds from flowing to other chains. Consequently, around $60 million would have remained immobilized on Cronos, representing nearly 91% of the stolen loot. The situation has kept the crypto community on edge, with the price of the CRO token remaining stable thanks to this swift intervention.
The link between Cronos, Tectonic, and Crypto.com
It is crucial to distinguish the roles of these different entities. Crypto.com designed Cronos, a chain that operates similarly to Ethereum, by issuing the CRO token which provides it with security and stability. In contrast, Tectonic, launched in December 2021 by Cronos Labs, operates independently, meaning that Crypto.com’s security measures were unable to protect Tectonic from the consequences of the hacking. Therefore, while the Crypto.com exchange remained intact, Tectonic users had to face uncertainties regarding their investments.
Impact on the lending market and depositors
Tectonic constituted a major part of the lending market on Cronos, managing approximately $121.6 million, or 46% of the total value of decentralized finance on this chain. In light of Tectonic’s failure, the second lender on the network is only able to manage around $30,000, illustrating the nearly total dominance of Tectonic in this space. This situation highlighted the vulnerability of DeFi protocols and raised concerns among investors and depositors, especially since no information has been communicated regarding a potential reimbursement.
Reactions from companies and post-hack analysis
The CEO of Crypto.com, Kris Marszalek, provided assurances that the application and the exchange are operating normally and that post-mortem analyses of the situation would be conducted to understand the implications of the hack. This series of events underscores the importance for blockchain actors to remain vigilant against such threats, especially in a landscape where similar attacks have already occurred, like the one on Moonwell which involved $8.7 million stolen, where no halt was executed.
Precedents in blockchain security
The suspension of the Cronos blockchain was made possible due to its technical structure, which relies on Tendermint and a maximum of 100 validators, thereby offering flexibility for a coordinated pause of the network in case of emergency. This emphasizes the importance of good technical design to prevent potential significant losses. In comparison, the hack on the BNB Chain in October 2022, where $570 million was siphoned off, demonstrates that some blockchains do not have the necessary mechanisms to react effectively to such incidents.
Moving towards better security
The security of blockchain and DeFi protocols has become a major concern in the industry. Recent incidents, including that of Tectonic, highlight the importance of developing robust solutions to prevent fraud and hacking. Companies must work together to strengthen the security of infrastructures, while ensuring that users are informed and prepared to face these challenges.
To learn more about security challenges in the blockchain space, you can check out these relevant articles: Compromised Security and How Blockchain Can Reduce Costs.
