A code flaw has temporarily slowed down one of the most successful digital assets this week.
On Wednesday, THORChain — among the oldest DeFi projects — announced that the protocol had suspended a number of core functions due to a security vulnerability disclosure in a TSS (threshold signature scheme) library maintained by Binance Smart Chain.
The project suspended functionality over the last three days for several operations that rely on TSS. The main focus of the project is to enable cross-chain asset exchanges, with various features.
In public channels, the team announced that it has a patch ready for its node operators. However, they are still waiting for other projects to create their patches in order to avoid risking their projects.
This statement put a halt to what was a very strong rally for THORChain’s Rune liquid token. Rune rallied by 60% over the past week ahead of the release a new product. But the rise has stopped with the token falling 3% in one day.
Several THORChain Team members failed to respond by publication time to requests for comments.
TSS vulnerability
The official THORChain Twitter page responded to a Tweet announcing the halt of trading across eight chains on Wednesday by writing: “most TSS libraries in production are vulnerable to a TSS security issue.”
Discord was the first place where this vulnerability was brought up on August 13th. Team representative stated that “a recent disclosure to Binance around their TSS implementation has caused them to make a security patch to the code.”
This prompted THORSec and THORNode to pause their node operations teams. “churning” — the process by which validators are added and removed from the network — until a THORNode patch could be released. According to THORChain, TSS is based primarily on Binance and two other libraries.
In an interview with Blockworks, pseudonymous developer GiMa of Maya Protocol — a fork of THORChain — said both teams have a patch ready, but are waiting on other teams to respond to the disclosure before releasing. GiMa said in a THORChain Telegram statement that they are expecting the patch release to occur within the next few weeks. “24 — 48” hours.
Binance Smart Chain TSS Github’s fork has occurred 50 times within the last 2 years.
The THORChain Team announced Tuesday evening that security advisers recommended delaying a new lending product due to a vulnerability.
As a result of the disclosures made by the traders, the Rune price has fallen 8% compared to its 24 hour highs. It is now $1.48 instead of $1.61.
Loans and Options
Prior to the TSS disclosures, THORChain’s Rune liquidity token had been on a tear — largely due to anticipation around the lending product.
Thorchain’s Chad Barraford hailed the product in a community tweet.
“When lending launches, we are, in my view, overnight, going to make the industry look like a bunch of dinosaurs. We’ve developed an entirely different design that makes the old one look like shit, to be honest. It is a very novel idea and experimental,” He said.
The THORfi lending documentation includes a list of key features. “0% interest, no liquidations and no expiration.”
THORfi Lending, however, is being marketed by the company as a new lending platform. However, some observers believe that the platform functions more like an option platform with the protocol as the issuer. The borrower can take out loans in dollars and then convert them into other currencies. “buy back” They can sell their collateral for a specific price. During the protocol’s operation, the collateral is sold at origination and bought back by the protocol at the agreed price. “exercising” You can choose to use the following option.
HackMD recently released a report on risk. “a [THORfi] loan behaves formally the same as an American call option,” The risks that a lending product poses to broader protocol are comparable to those faced by an option issuer.
Noteworthy, this new product brings with it new token-economic features.
Rune’s volume could increase significantly. Rune acts as an intermediate liquidity asset for certain cross-chain and one-sided transactions on the THORChainDEX, as well as deposits of single-sided liquid funds into this exchange.
Some have speculated that Rune may benefit from increased pressure to buy from the protocol. Also, the product that is being lent will have a mechanism for burning.
Rune has fallen 92% since its peak in May 2021, when it reached a price of $21.07.
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