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LUSD Token Attack Causes Liquidity Drain in DeFi Protocol Linear Finance

Linear Finance suffers a major security breach, resulting in the depletion of LUSD liquidity, while Linear Finance’s total value locked remains stable at $8 million, and its native token, LINA, maintains stability.

Key Points

  • Linear Finance experienced a security breach, draining all LUSD liquidity from PancakeSwap and Ascendex.
  • The value of LUSD collapsed to zero, but Linear Finance’s total value locked is still around $8 million.
  • The Linear Finance team implemented swift safety measures, pausing all protocol contracts to prevent further exploits.
  • Linear Finance’s native token, LINA, remains stable, currently trading at $0.011.

On September 21, Linear Finance, a decentralized finance (DeFi) protocol, announced that it had been the target of a security breach that resulted in the complete depletion of liquidity in its Linear USD (LUSD) token.

The attack affected the PancakeSwap and Ascendex decentralized exchanges, draining all LUSD liquidity.

LUSD Price Collapses to Zero

As a consequence of the security breach, the value of Linear Finance’s stablecoin, LUSD, experienced a total collapse in value due to the liquidity drain.

However, Linear Finance’s total value locked remains at approximately $8 million, indicating that the protocol itself has not been severely impacted. Interestingly, the native token of the DeFi protocol, LINA, has remained stable despite the attack and is currently trading at $0.011.

The security breach occurred when the attacker exploited the system by minting an unlimited supply of LAAVE tokens, which were then traded for LUSD on the Linear Exchange.

The attacker then dumped the acquired LUSD on PancakeSwap and Ascendex, leading to the significant drop in the stablecoin’s value.

Linear Finance Team Takes Immediate Action

In response to the attack, the Linear Finance team promptly apologized to the community and implemented various safety measures to protect the protocol, its assets, and its user community.

These measures included pausing all protocol contracts that facilitate token minting, burning, or exchanging to prevent further exploits.

Additionally, the team disabled the Linear bridge contract for LUSD to prevent the attacker from accessing it in the future.

They also sought the assistance of a leading security team to identify and apprehend the attacker(s). Lastly, the team shared information about the wallets involved in the exploit with major exchanges and relevant authorities.

Linear Finance is renowned for its support for cross-chain liquidity and synthetic asset trading. It operates a collateralized debt pool that allows users to deposit collateral and mint LUSD, which is then utilized for trading synthetic assets on the platform.

The governance of the protocol is driven by the LINA token, which is utilized for voting and staking rewards. Linear Finance offers two primary tokens: LINA for governance and staking, and LUSD, a stablecoin pegged to the US dollar that facilitates synthetic asset trading.

Concluding Thoughts

The security breach suffered by Linear Finance has resulted in the complete depletion of liquidity in its LUSD stablecoin.

However, measures have been swiftly implemented by the team to safeguard the protocol and its user community. Despite the attack, Linear Finance’s total value locked remains relatively stable.

The incident highlights the ongoing challenges and risks faced by DeFi protocols, emphasizing the importance of robust security measures in the space.