Onyx Shuts Down Ethereum-Based Lending Market Amid $3.8 Million Hack
Onyx Faces Major Security Breach
Onyx, a decentralized finance (DeFi) protocol, recently fell victim to a $3.8 million hack. This incident exploited a well-known but unaddressed security vulnerability. As a result, Onyx has decided to shut down its Ethereum-based lending market and plans to relaunch its governance-focused financial network, now named Onyx Core, with full community approval.
Community-Backed Relaunch Proposal
In response to the hack, Onyx introduced the Onyx Improvement Proposal (OIP)-46 on the same day as the security exploit. This proposal aims to relaunch Onyx Core and includes significant changes to the protocol and its product offerings. The key points of the proposal include:
- Shutting down the current Ethereum-based lending market
- Reimbursing lenders at a 1:1 payment ratio for the assets they supplied
By September 29, the proposal had garnered full support from Onyx community members, with no opposition. The execution of OIP-46 is scheduled for October 1.
Revamped Business Model
The restructuring will see Onyx Protocol operating as a closed-ended lending protocol on Onyx Core. This will allow users to wrap non-fungible tokens (NFTs), real-world assets (RWA), and crypto assets. The Onyx hacker had manipulated an NFTLiquidation contract to inflate the self-liquidation reward amount. According to blockchain security firm PeckShield, this vulnerability had been exploited before in October 2023.
Other similar hacks include the Hundred Finance hack in April 2023. The new restructuring aims to secure the Onyx Protocol from future attacks.
Rising Threats to Centralized Crypto Exchanges
While DeFi platforms have their vulnerabilities, centralized finance operators, such as crypto exchanges, have been the primary targets for hackers. According to Web3 cybersecurity company Cyvers, losses from crypto hacks in the first three quarters of 2024 exceeded $2.1 billion. Centralized exchanges experienced a staggering 984% year-on-year increase in losses, particularly in the second quarter, which saw $401 million lost.
Despite a 25% year-on-year drop in losses in the DeFi sector during the second quarter, the sector still recorded $171.3 million lost from 62 incidents.
Onyx’s Path Forward
The Onyx team will issue a revised white paper for the relaunch of Onyx Core as their primary product. This relaunch will include Onyxcoin (XCN) staking as a feature. The restructuring and relaunch aim to not only secure the protocol from future attacks but also to provide a more robust and community-supported financial network.
