Moonwell Breach: $1M Gone Due to Chainlink Vulnerability, WELL Cryptocurrency Dips to 2025 Lows

The occurrence of this week’s hacks comes at an inopportune moment, significantly affecting some of the top cryptos worth investing in. After the Balancer hack, more than $128 million was extracted from various Decentralized finance protocols. Consequently, there is widespread caution among participants. This situation is detrimental to crypto asset valuations overall.

Today, Moonwell DeFi has unfortunately become the target of yet another disheartening breach. While millions were not taken, and the threat of a mini-supply chain attack is not imminent, it still marks a setback for this relatively nascent yet encouraging crypto sector.

As of November 4, Moonwell oversees assets exceeding $234 million – a substantial growth of over four times since the beginning of 2023. At its peak, the DeFi platform boasted a total value locked (TVL) approaching $400 million. However, Assets Under Management (AuM) have been swiftly declining. It has diminished from roughly $350 million in early October to its current status.

(Source: DefiLlama)

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Moonwell DeFi Hack: Over $1M Lost, Blame Chainlink?

The vulnerability breach today could severely undermine confidence. It might hasten the outflow of capital from the Decentralized finance network.

As reported by distributed record security company CertiK, Moonwell was compromised today for around $1 million as a result of a flashloan vulnerability breach that leveraged flawed oracle price feeds from Chainlink.

The attacker specifically targeted Moonwell’s smart contracts on Base and Optimism layer-2s.

A flaw was identified in an off-chain oracle price feed from Chainlink for the rsETH/ETH pair, which incorrectly reported the price of wrstETH, the restaked counterpart of stETH on Lido, at over $5.8 million per coin.

(Source: CertiKAlert, X)

Currently, the real-time price of ETH, which is the benchmark for all staked or restaked variations, is trading below $3,500.

As a result of this oracle manipulation, the perpetrator, presumably an MEV bot, exaggerated the perceived collateral value, enabling them to take a large flash loan against otherwise negligible deposits of just 0.02 wrstETH.

Thanks to the faulty oracle, the platform miscalculated the value of the 0.02 wrstETH deposit at over $116,000. Leveraging this inflated collateral, the attacker borrowed 20 wstETH, effectively depleting Moonwell’s wstETH reserves.

The assailant duplicated this tactic across several transactions, as noted by CertiK, each time executing a flash loan on a small scale until they successfully extracted 295 ETH, approximating $1M, by the time the issue was identified.

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The Bad Announcement And The Good Update

Regrettably, this isn’t the first occasion Moonwell has incurred losses.

It is evident that its smart contracts have vulnerabilities, and a lasting solution is essential.

In December 2024, Moonwell faced a $320,000 wrecked due to a flash loan vulnerability breach targeting its USDC lending contract.

On October 10, amidst a downturn in crypto prices, its contract on Base experienced an exploit resulting in a loss exceeding $1.7M.

For the moment, it remains uncertain what measures the Moonwell development team will implement to rectify the issue for good.

The silver lining, and potentially a significant relief, is that the current loss stems not from a direct code breach but from an hack involving price manipulation. It reassures that its lending mechanisms remain robust, but the dependency on external price feeds introduces vulnerabilities.

In the aftermath of this breach, WELL USDT plummeted to unprecedented lows, extending total losses from all-time highs to over -96%.

(Source: WELL USDT, TradingView)

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