A trader has leveraged different protocols in the field of decentralized finance (DeFi) to net a whopping $350,000.

By executing an intelligent set of instructions all executed in one large transaction, a person can take advantage of existing weaknesses in the DeFi ecosystem for their own gain.

Through several decentralized financial instruments, and a small dose of price manipulation, he managed to get a lot of Ethereum.

Julian Botlob, founder of DeFi investment firm Stake Capital, put together this image to show the complexity of the multi-layered deal, trying to explain what happened:

~353K net profit using “sophisticated” arb on Fulcrum Tweet embed
1- He obtained a flash loan of $2.7 million.Tweet embed 10kETH
2. Output 5.5KB ETH Tweet embedI borrowed 112 WBTC
3. short WBTC on bzx # sETHwBTC5x
4. Dump 112 WBTC in #KyberUniswap To trigger a short (Oasis?)
5- Repaid loan
6- Profit pic.twitter.com/11YWpUZe0o

Read:The price of Bitcoin touches about 45 thousand dollars, with the acceleration of purchases

– Julian Boutelope (@bneiluj) February 15, 2020

Where the hacker identified a quick loan of 10,000 ETH and he may be the reason for this.

Then he deposited half of it to the syndicated lending platform to borrow bitcoins.

The rest was a guarantee of short selling – betting on a drop in price – on the Fulcrum margin trading platform.

He then sold his bitcoins on Uniswap, a decentralized exchange.

The price went down, so the hacker took the winnings at a profit and paid off the initial loan.

But not only that, as the hacker discovered how a variety of DeFi tools could be used together to generate somewhat unethical profits.

This illustrated the centrality of some DeFi instruments.

Yesterday, bZx, which operates the Fulcrum protocol, posted an update on the situation and said that none of the users on its platform lost any money.

From our side on the Arab Bitcoin website, we mentioned this in the topic:

bZX decentralized finance protocol hacked and thousands of dollars stolen

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SAFU funds:

1/*All users have zero losses*. Last night there was a widespread attack against our protocol. From a protocol perspective, someone took out a loan. From the lender’s point of view, this loan is like any other loan.

– bZx (bzxHQ) February 15, 2020

And bZx stated in the above tweet what it means:

All users have zero losses.

Last night there was a widespread attack against our protocol.

From a protocol point of view, someone simply took out a loan.

From a lender’s point of view, this loan is like any other loan.

The platform went on to say that the attacker left $600,000 of bitcoins wrapped in the exchange.

It plans to take this money and distribute it to other users of the platform.

But to do that, you will need to use the Private Key.

She spoke about it by saying:

There are currently 600,000 wBTC collateral left by the attacker.

Read:Monero Coin Team Issues Security Warning After Its Binary System Has Been Hacked

We will use this and distribute the liquidity to existing iETH holders.

This will be done using our admin key.

This is a very difficult decision for us.

Essentially, this admin key is inserted into the protocol and allows bZx to control any of the smart contracts – where the funds are held – as a last resort.

The purpose of the admin switch is precisely at one of these moments, where something has gone wrong and there is a lot of money at stake.

But the admin key is evidence that there is a central point of failure and that users have to trust the team behind the platform not to steal everyone’s money.

Given that the whole purpose of DeFi is to remove the middleman, there seems to be a rather big weakness in bZx.

Not surprisingly, DeFi protocols are experiencing some failures in their work.

The biggest memorable experience happened with the Ethereum DAO which at one point contained roughly 14% of the entire Ethereum supply and crashed due to an error in two lines of code.

As a result, the entire Ethereum blockchain was rewritten and the fork occurred so that everyone could get their money back.

But it has faced a lot of criticism.

This time, Fulcrum will be using its admin key, but by revealing how central it really is it opens the door to many more questions.

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