Crypto Security Firm PeckShield Uncovers $7.5M ETH Loss in Jimbo Protocol Breach

Key Insights:

  • PeckShield identifies a $7.5M ETH loss due to a security breach in the Jimbo protocol caused by inadequate slippage control.
  • Attackers exploit the vulnerability through a flash loan attack, manipulating price fluctuations for substantial profits.
  • JIMBO token value declines by 40%, impacting token holders during daily activity and revenue of the protocol decrease.

PeckShield, a crypto-security firm, raised concerns regarding potentially suspicious activity observed on the Jimbo protocol. Jimbo, a decentralized finance liquidity protocol, introduced its native token, JIMBO, through the TraderJoe platform [JOE] on the 28th of May.

Security Breach Alert: $7.5M ETH Loss

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After an extensive investigation, PeckShield’s analysis unveiled that the breach led to the unfortunate loss of 4090 Ether [ETH], roughly valued at $7.5M. Insufficient measures to control slippage during liquidity shifts were pinpointed as the primary factor behind the security breach. Consequently, the protocol’s liquidity was unintentionally allocated to a price range with substantial skewness and imbalance.

To provide context, the concept of slippage control involves implementing a mechanism or feature that effectively handles price slippage in trading or liquidity-related activities. Price slippage arises when the executed price deviates from the expected price of an asset. In the realm of liquidity adjustments, slippage control endeavors to mitigate the influence of significant trades or changes in liquidity on the asset’s price, thus ensuring minimal impact.

Subsequently, the attackers utilized a reverse swap mechanism to exploit this vulnerability, allowing them to capitalize on the manipulated price fluctuations and generate substantial profits.

The Dark Art of Flash Loan Attacks

In the realm of exploits, a reverse swap mechanism, famously known as a “flash loan attack,” involves a cunning strategy wherein an assailant secures a substantial asset loan (often via a flash loan) and deftly manipulates the market conditions to reap personal gains. By carefully orchestrating a sequence of trades or transactions, the attacker purposefully influences the price or liquidity of specific assets, ingeniously capitalizing on the resultant opportunity for lucrative profits.

After successfully manipulating the situation and attaining the intended result, the perpetrator promptly repays the borrowed assets, often within the same transaction. As a result, they retain the profits gained while eliminating any net risk exposure.

As a result of recent developments, the value of JIMBO experienced a significant decline of 40%, causing a detrimental effect on token holders.

JIMBO, an innovative protocol created utilizing TraderJoe, a decentralized exchange (DEX) protocol available on both Arbitrum (ARB) and Avalanche (AVAX), has experienced a notable decline in daily activity and generated revenue within the past 24 hours.

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In recent months, there has been a significant decline in the value of the ARB and JOE tokens compared to the previous month. Nevertheless, the prices of both tokens have remained relatively stable within the past 24 hours, showing minimal fluctuations.