Unforeseen Turmoil: FLOW Coin Faces Downturn Following Security Scare

In a surprising turn of events, the Flow Foundation has launched an investigation into a suspected security breach within the Flow network. This announcement led to major South Korean cryptocurrency exchanges halting transfers of altcoins, a decision which saw FLOW coin’s market value drop by more than half within just hours. After hitting a low of nearly $0.92, the price showed resilience and began to recover, trading at $0.1167 as this report was crafted.

The Trail of a Possible Attack: What Does the Data Reveal?

The Flow Foundation’s statement on X revealed that their engineering teams are intensively probing the security concern and are collaborating with network counterparts to mitigate its effects. Blockchain analyst Wazz has pointed out certain activities consistent with an attack, estimating financial damages in the vicinity of $4 million.

Wazz’s insights indicate the attacker exploited the TransparentUpgradeableProxy contract to mint an immense amount of wrapped FLOW (WFLOW) from a wallet that had been created around half a year ago, signifying that the incident might be the result of a private key theft rather than a flaw in the smart contract itself.

Security specialist Taylor Monahan expressed to The Block that the perpetrator not only minted FLOW coin but also manufactured bridged assets such as WBTC, WETH, and various stablecoins. Monahan noted that the fraudulent activities culminated in a $3.9 million deficit, prompting the suspension of all pools and bridges.

How Did South Korea Respond to This Crisis?

Following the unsettling disclosure, South Korean exchanges Upbit and Bithumb decisively paused all FLOW coin transactions. The Digital Asset Exchange Alliance (DAXA), which includes the country’s leading five crypto exchange platforms, issued an alert concerning the heightened risk associated with the coin, contemplating advanced protective strategies ranging from trading limitations to service discontinuation.

Flow, a creation of Dapper Labs, stands as a prominent Layer-1 network, recognized notably for its digitized projects in the NFT space like NBA Top Shot and CryptoKitties. At its zenith in 2021, the network facilitated NFT trades exceeding hundreds of millions of dollars in monthly volumes.

Nevertheless, as the NFT market momentum wanes, Flow’s ecosystem has felt the squeeze. Dapper Labs, once appraised at $7.6 billion two years ago, has been compelled to undertake a series of staff reductions starting from 2022.

“The community’s safety is our top priority as we strive to address this security threat, working hand-in-hand with partners to contain the impact,” stated a spokesperson from the Flow Foundation.

The ongoing investigation underscores the unpredictable landscape of digital currencies and the critical need for robust security measures within the crypto sector. As developments unfold, the industry’s stakeholders await further clarifications concerning the incident and its wider implications for the Flow network and the cryptocurrency ecosystem at large.