There has been a bridge hack on the Arbitrum blockchain network with around $24M in USDC stablecoin withdrawn as a result.
Cause Unknown
Reported by BlockAid and confirmed by the co-founder of Arbitrum, Steven Goldfeder, a third-party bridge related to AFX Protocol was drained, with potential users affected.
Arbitrum is a popular Layer 2 chain built on top of Ethereum. However, according to both Blockaid and Arbitrum, it did not come from the native bridge chain.
A possible cause for this particular incident is not fully disclosed as the investigation is still underway.
There is also the matter of how quickly stablecoin issuers, such as Circle and Tether, can deal with freezing wallet addresses of hackers when an incident is happening in real-time.
Algorithmic Risk Continues
Before this, there was a different onchain security issue.
42DAO, a platform operating the algorithmic stablecoin Balance Coin (BLC) operations, was recently breached and subsequently depegged from the $1 price point.
Algorithmic stablecoins continue to contain risk for users and their ability to truly maintain a peg due to weaknesses in the underlying mechanism. Similar to the Terra Luna UST crash in 2022.
They are not the same as regulated payment and fiat-backed stablecoins with transparent auditing reports and stablecoin reserves comprising short-term, liquid, and cash assets.
42DAO is still investigating to resolve the issue.
