When a hacker modifies a contract’s code to constantly mint new tokens above the permitted supply limit, it’s known as an infinite mint assault. The majority of these hacks occur in protocols related to decentralised finance (DeFi).
An assault that creates an endless number of tokens undermines the value and integrity of a cryptocurrency. For example, the Paid network experienced a $180 million loss and an 85% decline in value after a hacker took advantage of a vulnerability in the smart contract to issue and burn tokens.
Before the hack was stopped, more than 2.5 million PAID tokens were converted to Ether (ETH). Users were compensated by the network, putting an end to reports of an inside job (rug pull).
The malicious actor might profit from such attacks by selling the tokens created illegally or by interfering with the impacted blockchain network’s regular operations. The prevalence of infinite mint attacks emphasizes how crucial it is to perform thorough code audits and incorporate security measures into smart contract development to protect against exploits of this kind.
How does an attack with limitless mints operate?
An endless mint attack targets vulnerabilities in smart contracts, notably those related to token minting features, in an attempt to open a loophole that would allow the attacker to mint an infinite number of tokens.
Step 1: Identification of vulnerabilities Finding logical flaws in the contract—usually pertaining to input validation or access control mechanisms—is the attack’s tactic. The attacker finds the vulnerability and uses it to generate a transaction that causes the contract to mint new tokens without the required authorization or verification. Due to this vulnerability, it may be possible to go around the intended restrictions on the maximum amount of tokens that can be created.
Step 2: Exploitation
The vulnerability is triggered by a malicious transaction that the attacker constructs. This could entail changing parameters, executing particular functions, or taking advantage of unforeseen connections between various code segments.
Step 3: Unlimited mining and token dumping
The exploit allows the attacker to issue tokens in excess of what the protocol’s architecture intended. This token flood may cause inflation, which would lower the value of the coin linked to the tokens and could result in losses for various stakeholders, including investors and users.
Token dumping is the practice of an attacker swiftly flooding the market with freshly created tokens and then exchanging them for stablecoins or other cryptocurrencies. The original token’s value is sharply diminished by this unexpected increase in supply, causing a price collapse. However, selling the inflated tokens before the market has a chance to benefit the attacker.
Downsides of an infinite mint attack
An endless mint attack causes financial losses, ecosystem instability, and a sharp decline in the value of tokens. When an infinite mint assault produces an unlimited number of tokens or cryptocurrency, the impacted asset’s value is rapidly reduced, causing users and investors to suffer significant losses. Because it undermines trust in the affected blockchain network and the decentralised apps that are connected to it, this jeopardises the integrity of the entire ecosystem. Furthermore, the attacker stands to gain and may leave others with worthless assets if they sell the inflated tokens before the market reacts properly. Therefore, if the attack results in a liquidity crisis, investors might find it challenging or impossible to sell their assets at a reasonable price.
For instance, during the December 2020 Cover Protocol attack, the token’s value fell from over $700 to less than $5 in a matter of hours, and investors who held COVER tokens suffered financial losses. The hackers minted over 40 quintillion coins.
The collapse of the token’s value can disrupt the entire ecosystem, including decentralized applications (DApps), exchanges and other services that rely on the token’s stability. The attack may result in legal issues and regulatory scrutiny of the project, which could result in fines or other penalties.
How to stop an endless mint cryptocurrency attack
By prioritising security and implementing preventive measures, cryptocurrency projects can significantly reduce the likelihood of falling victim to an infinite mint attack and protect the investments of community members. To stop infinite mint attacks, a cryptocurrency project needs a multidimensional approach that prioritises security at every turn. Conducting comprehensive and regular smart contract audits by impartial security specialists is essential. These audits meticulously examine the code to look for vulnerabilities that may be exploited to create limitless quantities of money.
Strong access restrictions, limiting minting authority to approved parties, and using multisignature wallets for enhanced security are all necessary. Tools for real-time monitoring are required to detect any unusual transaction patterns or sudden spikes in the token supply, as well as to react swiftly to potential assaults. Additionally, projects need to have solid backup plans in place so they can react swiftly to any potential attacks and limit damage. In order to foresee issues and devise solutions, it is necessary to maintain constant communication with exchanges, wallet providers, and the community at large.