Mirror Protocol has been exploited $2M due to Luna pricing error

Mirror Protocol, which is a large Defi money market on Terra, has been exploited for over $2 Million as a result of manipulations with price oracles. 

First, let’s see how Mirror Protocol works!

Mirror Protocol provides a range of tools to create synthetic assets, also known as “mAssets”. Users can create a position on the protocol to get their own synthetic assets that mirror the value of their real-life alternatives. After this, users need to deposit collateral. Then the system will regulate all collateral supplies to mitigate the risk for lenders & ensure there are always enough funds to cover any mAssets. Once an mAsset has been created, it’s listed against $UST (Terra’s dollar-pegged stablecoin) on the Terraswap platform.

And what happened with Mirror Protocol? 

To be specific, validators on Terra Classic used a faulty price oracle that reported the price of the new Terra 2.0 $LUNA coin (~$9.80) instead of the original Terra Classic $LUNC coin (~$0.0001), confirmed by Chainlink community member ChainLinkGod. The attacker used a loop of swapping $LUNC (with a faulty price as $LUNA) to get “mAssets” and $UST in Mirror Protocol. Consequently, several synthetic asset pools on the protocol including the Mirror BTC (mBTC), Mirror Polkadot (mDOT), Mirror Ether (mETH) and Mirror Galaxy (mGLXY) were under attack and drained for over $2 Million. 

This is not the first time Mirror Protocol was exploited, in October 2021, Mirror Protocol lost about $90 Million on the old Terra Blockchain, which went unnoticed for months.

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