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Blockchain security auditor Hacken has disclosed a major exploit involving the unauthorized minting of HAI tokens on both the Ethereum and BNB Chain networks. The incident has raised significant concerns about blockchain security and the vulnerabilities within token bridge infrastructures.

Details of the Exploit

On June 21, a compromised private key allowed a malicious actor to mint 900 million HAI tokens. These tokens were quickly dumped on decentralized exchanges, causing substantial market disruption. Hacken revealed that the breach occurred during architectural updates to its blockchain bridge infrastructure, which were intended to improve security. Unfortunately, during this process, a private key linked to a contract with minting privileges was exposed.

What is a Blockchain Bridge?

Hacken’s blockchain bridge facilitates token transfers between networks like Ethereum and BNB Chain. However, the bridge was initially developed during a period when market conditions and technology were vastly different. Redesigning such infrastructure involves complex legal and technical challenges, including the migration of smart contracts.

Immediate Response to the Breach

In response to the exploit, Hacken took swift action by revoking the compromised minter account’s access and pausing all bridge transactions on Ethereum and BNB Chain. Despite these measures, the attacker managed to profit approximately $250,000 in realized losses. Further damage was mitigated due to the low liquidity of the token.

Warnings for Users

Hacken has strongly advised users to avoid interacting with HAI tokens for the time being. The company also warned that any circulating airdrop claims related to the token are fraudulent and should be ignored.

Leadership’s Response and Future Plans

Hacken CEO Dyma Budorin acknowledged the company’s responsibility for the exploit, citing the absence of a multisignature (multisig) bridge infrastructure as a key factor in the breach. He reassured the community that Hacken’s core infrastructure remains secure and unaffected by the incident.

Budorin also announced that tokens purchased on Ethereum and BNB Chain after the hack would not be supported in the project’s upcoming tokenomics update. A snapshot has been taken to track legitimate user balances, and a migration path will be outlined soon.

Long-Term Strategy for HAI

In light of this breach, Hacken has accelerated its plans to restructure HAI into a regulated financial instrument. The company aims to transform the token into a security token that combines utility with equity rights, representing Hacken’s corporate equity. This move is expected to enhance transparency and align the token with regulatory standards.

Market Impact

Following the exploit, the value of HAI experienced a dramatic decline, plunging nearly 99%. The token dropped from $0.015 to $0.000056 before partially recovering to $0.00967 at the time of reporting. This significant price movement underscores the impact of security breaches on investor confidence and market stability.

Lessons from the Incident

The breach highlights the critical importance of robust access control measures in blockchain systems. A Hacken report from last year identified private key leaks and access control vulnerabilities as the leading causes of crypto hack losses, accounting for 78% of total damages. This incident serves as a reminder of the ongoing need for enhanced security protocols in the cryptocurrency industry.

For investors and blockchain enthusiasts, this event underscores the importance of due diligence when engaging with crypto projects, especially those involving cross-chain bridges. By staying informed and cautious, users can better navigate the evolving landscape of cryptocurrency and blockchain technology.

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