The Flow Foundation announced on Saturday its investigation into a potential security incident affecting the Flow network. Following the announcement, major cryptocurrency exchanges in South Korea halted altcoin transfers, causing the price of FLOW coin to plummet by over 50% in a matter of hours. Despite bottoming out at approximately $0.92, it showed signs of recovery, trading at $0.1167 during report preparation.
The Trail of a Possible Attack: WFLOW Coin Minting via Proxy
According to the Flow Foundation’s announcement on X, engineering teams are investigating a potential security incident that could affect the network and are taking preventative measures in coordination with network partners. Blockchain analyst Wazz highlighted movements characteristic of an attack right after the price collapse, estimating losses around $4 million.
Wazz’s analysis suggests the attacker minted millions of wrapped FLOW (WFLOW) using the TransparentUpgradeableProxy contract from a wallet created approximately six months ago. He indicated that this scenario aligns more with a private key compromise than a smart contract vulnerability.
Security expert Taylor Monahan, speaking directly to The Block, pointed out that along with FLOW coin, the attacker also minted bridged assets like WBTC, WETH, and stablecoins. Monahan noted a $3.9 million loss, and said all pools and bridges have been paused.
South Korean Exchanges Halt Transactions, Issue Risk Warning
Following the incident’s revelation, Upbit and Bithumb suspended FLOW coin deposits and withdrawals. The Digital Asset Exchange Alliance (DAXA), uniting South Korea’s top five cryptocurrency exchanges, officially issued a transaction risk alert for the coin, highlighting that additional protective steps could range from trading restrictions to the cessation of support.
Flow, developed by Dapper Labs, emerged as a prominent Layer-1 network propelled by NFT projects like NBA Top Shot and CryptoKitties, with a focus on consumer applications and digital collectibles. During its peak in 2021, the network witnessed NFT transaction volumes amounting to hundreds of millions of dollars monthly.
Post the cooling of the NFT market, the Flow ecosystem has been under pressure. Dapper Labs, which was once valued at $7.6 billion in 2021, has since conducted multiple rounds of layoffs starting in 2022.
