Osmosis DEX Chain Temporarily Ceases Operations After $5M Hack

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DeFi
Osmosis DEX Chain Temporarily Ceases Operations After $5M Hack

Osmosis, a well-known DEX on the Cosmos ecosystem, was compromised today as losses hit $5 million. The network’s validators had to halt its services abruptly to save the residual liquidity.

A Reddit User First Reported the Issue

According to the DEX’s official discord, the osmosis chain has been paused due to “emergency maintenance,” advising users not to utilize the chain or the DEX for any crypto activity for the time being.

An emergency flaw has been identified in the Osmosis blockchain’s liquidity pools, used to establish liquidity and trade IBC-enabled currencies.

It all began when Reddit user “Straight-Hat3855” claimed in an already deleted post that there was a significant vulnerability in which anyone could add liquidity to any pool and the amount of the liquidity withdrawal was 50% greater than the deposit.

Even though no one believed it, the Osmosis team confirmed that the flaw allowed malevolent users to withdraw $5 million from liquidity pools. On-chain operations suggest that users had already begun to use the vulnerability to siphon funds out of Osmosis before its validators shut down the platform.

Osmosis Chain will be Temporarily Unavailable

Due to the inevitable chain halt, the Osmosis DEX and its native wallet are currently inaccessible. Before the operators can restart the network, the team is working on releasing a fix.

The validators were able to respond within 12 minutes after discovering the problem. Consequently, the network custodians suspended the chain at block #4713064. According to a Discord post by Osmosis community analyst RoboMcGobo, developers paused the chain for emergency maintenance.

The recent exploit follows a not-so-old software update on Osmosis’ platform to increase efficiency and user experience. After the upgrade, certain validators apparently noticed difficulties, such as “always missing some blocks.”

The Halt Prevented Total Liquidity Drain

Osmosis posted an update on Twitter:

“The liquid pools had not been “totally emptied.” Devs are correcting the bug, estimating the extent of the losses (likely in the $5 million area), and working on recovery. More information will be forthcoming.”

Before the chain was shut down, it ran a decentralized exchange (DEX) with a daily trade volume of $11.8 million. The Osmosis token (OSMO) has declined 6.96 percent in the last 24 hours, according to trading on MEXC.

OSMO’s price had dropped by 4.3 percent in the last 24 hours as of reporting time, at $1.08. According to CoinGecko data, the coin dropped by about 90 percent from its all-time high of $11.25 on March 4.

Earlier, DigitalCoinPrice predicted that OSMO could reach $6.00 by the end of June this year. However, some unprecedented risks have taken a toll on OSMO’s price. In 2023, the site predicts an average value of $5.89. The forecaster predicted an osmosis price of $8.08 in 2025. The site also predicts a general year-on-year increase, resulting in an average price prediction of $18.77 in 2030.

GovCapital had the most optimistic expectation of the forecasters, predicting a value of $6.45 in a year and $44.92 in five years.

Wayne Jones

Wayne is an all-rounded cryptocurrency writer who has written for several publications in the fintech industry. Having graduated from the University of Essex Colchester, he developed a passion for blockchain technology and has been curious about how the blockchain can modify the traditional financial industry.