According to a tweet from the project’s Twitter account on Saturday, the lending platform Lodestar Finance, built on Arbitrum, was hacked on December 10, 2022. Lodestar suffered a loss of about $6.9 million, according to the reports.
But do you know what an Arbitrum is?
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What Is Arbitrum?
The platform Ethereum is immensely popular for creating decentralized applications (DApps). But in recent years, a sharp increase in use has driven the network to its breaking point, driving up transaction costs and causing unrelenting congestion.
While some groups think that on-chain modifications and upgrades are the best approaches to growing Ethereum, other groups are instead researching alternate paths, known as the second layer solutions.
A layer 2 solution called Arbitrum is designed to improve Ethereum smart contracts’ functionality by increasing their speed and scalability and, in addition, by introducing more privacy features.
The platform is intended to let programmers take advantage of Ethereum’s top-notch layer 1 security while running unaltered Ethereum Virtual Machine (EVM) contracts and transactions on a second layer.
It is designed to address some of the drawbacks of existing Ethereum-based smart contracts, namely their low efficiency and high execution costs, which have harmed the Ethereum user experience and frequently make transacting expensive.
How Did The Hacker Steal From Them?
Several reports outline how the decentralized financial platform Lodestar Finance was stolen for $6.9 million via hacking. According to their official Twitter account, the system was hacked and deposits have been drained. If they consider the recovery possibilities, supply and borrow balances won’t change because they have set all interest rates to zero.
According to Lodestar, the hacker manipulated the plvGLP contract’s exchange rate before supplying plvGLP collateral to Lodestar and borrowing all available cash. The hacker was able to cash out what they could as a result. The team remarked on Saturday that a margin-ratio mechanism stopped them from fully paying out the plvGLP.
Members of the Lodestar team disclosed that borrowing and liquidation had been halted. In Lodestar, the total value locked was reduced from nearly $7 million to just $11.06. Lodestar, the project’s native cryptocurrency, has lost 53% of its value versus the US dollar over the past 24 hours.
On November 23, 2022, Lodestar reached an all-time high of $0.718 per unit. Since then, LODE’s value decreased by 76.1% with a 24-hour price range of roughly $0.13 to $0.369 per unit.
How Does An Arbitrum Work?
An optimistic rollup is a form of technology that is used in Arbitrum. By transmitting messages between smart contracts on the Ethereum main chain and those on the Arbitrum second layer chain, it enables Ethereum smart contracts to scale.
Significantly increasing speed and efficiency, a large portion of the transaction processing is carried out on the second layer, with the results being recorded on the main chain.
The term ‘rollup’ refers to the process of using public information to reconstruct the entire history of the chain from an optimized log of events. It is optimistic in the sense that any validator can post a rollup block and confirm the validity of other blocks.
The software also features a unique virtual computer that it created and properly calls the Arbitrum Virtual Machine (AVM). This is the area in which Arbitrum smart contracts are executed.
It is located above EthBridge, a group of smart contracts that communicates with the Arbitrum chain. Smart contracts that are compatible with Ethereum are automatically converted to work with the AVM.
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Certain features make Arbitrum different from the rest. Let us take a look at that:
- High EVM compatibility
- Robust developer tooling
- Low fees
- Fairly launched
- Well-developed ecosystem
History Of Arbitrum
Ed Felton, a Princeton professor of computer science and public affairs, co-founded Offchain Labs, the organization that created Arbitrum in 2018.
Between 2015 to 2017, he worked for the White House as the President’s senior advisor and deputy chief technology officer. Since its founding, off-chain Labs has already benefited from sizable investments from Coinbase Ventures, Pantera, Blocknation, and Compound.
After its rival Optimism delayed its release, Arbitrum one opened to developers on May 28, 2021. Given that top platforms like Uniswap and Sushiswap have joined its network, Arbitrum might soon take over other Layer 2 solutions in terms of popularity.
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