Crypto exchanges help recover most of the funds lost in Curve defi breach

Binance, one of the world's largest cryptocurrency exchanges, has announced that it has helped recover over 80% of the tokens that were stolen in a breach of decentralized finance platform, Curve Finance. Changpeng Zhao, chief executive of Binance, said over a tweet that the hackers who exploited the glitch on Curve to steal around $570,000 in Ether (ETH) "kept on sending the funds to Binance in different ways."

It is the transfers made by the hackers, from wallets that were blacklisted and linked to the theft of ETH on Curve, that has led to the tokens being frozen while being transferred.

Binance is not the only exchange to have traced and blocked the stolen tokens. Fixed Float, a cryptocurrency exchange based on Lightning Network -- a protocol based on the Bitcoin blockchain -- said in the early hours of Wednesday, August 10 that it froze a part of the stolen funds amounting to 112 ETH (about $210,000).

A cryptocurrency protocol is based on a public blockchain, which helps improve various aspects of the blockchain. For instance, Lightning Network helps improve the speed of transactions on Bitcoin.

The Curve Finance breach added to an increasing volume of hacks on decentralized finance products around the world -- the largest of which in recent times was the $600 million breach of Ethereum side-chain Ronin in March this year. A glitch in the domain name system (DNS) file server used by Curve was exploited by hackers to mimic the service and redirect users to a fake website, from where they stole over $570,000 in ETH.

The traceability of crypto tokens, while not being infallible, can help recover funds if they are transferred to blacklisted wallet addresses. As long as transactions of crypto tokens are on a blockchain, they can be traced -- and it could become difficult for hackers to encash their loot.

However, there are various ways -- such as off-chain transactions, privacy-centric blockchain networks and lack of identity verification of crypto wallets held outside India -- that can help users with malicious intent to hide their crypto activities. Indian crypto exchange WazirX, along with Binance, is being investigated at the moment by Ministry of Finance body, Enforcement Directorate, with regards to transfer of tokens -- and off-chain transactions between the two exchanges.