Cronos, a Cosmos-based blockchain with Ethereum compatibility, halted block production on Sunday after an attacker exploited Tectonic, a leading lending protocol on the network. The incident caused an estimated \$75 million loss and forced validators to choose between allowing the attack to continue or temporarily shutting down the chain.

The hack targeted TONIC, Tectonic's governance and reward token. According to on-chain activity, the attacker inflated the price of TONIC by roughly 100 times in shallow liquidity markets. TONIC was then used as collateral to borrow real assets from Tectonic's lending pools. Validators paused Cronos after detecting the suspicious outflows, freezing most of the attacker's remaining funds in the protocol.

Key facts behind the halt

• Cronos validators suspended block production Sunday in response to the Tectonic exploit.
• The attacker is believed to have pumped TONIC's price about 100-fold before borrowing real assets from Tectonic.
• Tectonic's total value locked fell from roughly \$121.7 million on Aug. 26 to about \$3 million by Monday, according to DeFi data trackers.
• Cronos and Tectonic had not announced a restart timetable or verified the exact size of the losses as of Monday morning.

Cronos and Tectonic

Cronos launched in 2021 as an interoperable chain built with the Cosmos SDK and an Ethereum-compatible runtime. It was created with backing from Crypto.com, which wanted to bring mainstream users into decentralized finance. The chain uses a Tendermint-style consensus mechanism and supports smart contracts, making it easy for developers to build decentralized exchanges, lending services and NFT projects.

Tectonic was one of the first major DeFi applications to gain traction on Cronos. It is an algorithmic money market in the style of Compound and Aave. Users deposit assets such as stablecoins or the native tokens of Cronos and receive interest from borrowers. Borrowers, in turn, must provide collateral that is worth more than their loan. The protocol's token, TONIC, is distributed to users as a reward and is used for governance decisions.

At its peak, Tectonic's lending pools held hundreds of millions of dollars in value. The protocol grew quickly because of generous TONIC incentives and lower fees than Ethereum. However, the design of many such protocols depends on accurate price feeds to determine how much a user can borrow and whether a loan should be liquidated.

How the exploit worked

The exploit appears to have been a classic oracle manipulation attack, made worse by the low liquidity of TONIC tokens on decentralized exchanges. TONIC was a speculative asset whose dollar price could be moved with a relatively small amount of capital. The attacker took advantage of this by buying large quantities of TONIC and pushing the market price far above its normal range. Exact technical details were still being investigated, but blockchain data shows TONIC's price surged as much as one hundred times before the attack was stopped.

Once TONIC appeared extremely valuable on paper, the attacker deposited TONIC into Tectonic

Source:Coindesk News