An infinite mint attack happens whenever an attacker manipulates a contract’s code to constantly mint new tokens beyond the authorized supply limit.
This type of hack is common in decentralized finance (DeFi) protocols. This attack compromises the value and integrity of a token or crypto by developing an infinite quantity of them.
For example, a hacker exploited the Paid network’s smart contract vulnerability to mint and burn tokens, resulting in a $180 million loss and an 85% plunge in PAID’s value. At least 2.5 million PAID tokens were changed to Ether (ETH) before that attack was thwarted. The network reimbursed users, dispelling rumors of an inside job featuring rug pulls.
The malicious actor could profit from these attacks by selling the tokens created illegally or interfering with the affected blockchain network’s normal operations. The prevalence of infinite mint attacks insists on how important it is to perform extensive code audits and integrate security measures into smart contract development to protect against exploits of this type.
How An Infinite Mint Attack Operates
To develop a loophole that enables the attacker to mint an infinite number of tokens, an infinite mint attack targets various vulnerabilities in smart contracts, particularly those linked to token minting features and functionalities.
Step 1: Vulnerability Identification
The attack’s strategy features locating logical weaknesses in the contract, normally related to input validation or access control mechanisms. After the vulnerability is discovered, the attacker sets up a transaction that benefits from it, causing the contract to mint new tokens without authorization or validation. The vulnerability may support bypassing the intended limitations on the number of tokens that can be created.
Step 2: Exploitation
The vulnerability is triggered by the illegal and malicious transaction that the attacker develops. This could include changing parameters, executing specific functions, and taking advantage of any unforeseen connections between different code segments.
Step 3: Unlimited Mining And Token Dumping
The exploit enables the attacker to issue tokens surpassing what the protocol’s infrastructure intended. This abrupt token flood might cause inflation, which might lower the value of the coin connected to the tokens and might result in losses for different stakeholders, including users and investors.
Token dumping is the practice of an attacker quickly flooding the market with newly created tokens and exchanging them for stablecoins and other cryptos. The original token’s value depletes steeply due to the abrupt surge in supply, resulting in a price drop. Nonetheless, selling the inflated tokens before the market has an opportunity to benefit the attacker.
Results Of An Infinite Mint Attack
An infinite mint attack results in the quick devaluation of a token’s value, financial losses, and ecosystem disruption.
An infinite mint attack develops an unlimited quantity of crypto or tokens, quickly devaluing the impacted asset and causing massive losses for investors and users. This eventually compromises the integrity of the whole ecosystem by undermining confidence in the affected blockchain network and the decentralized apps (dApps) linked to it.
Additionally, by selling the inflated tokens before the market entirely reacts, the attacker may benefit and potentially leave others holding some worthless assets. As a result, investors might find it challenging or nearly impossible to sell their assets at a fair price in case the attack results in a liquidity crisis.
For example, in the December 2020 Cover Protocol attack, the token’s value dropped from $700 to less than $5 within a few hours and investors who held COVER tokens suffered massive financial losses. The hackers had minted more than 40 quintillion coins.
The collapse of this token’s value might disrupt the whole ecosystem, including decentralized applications (dApps), exchanges, and other services heavily relying on the token’s stability. The attack might result in various legal issues and regulatory Scrutiny of the project, which may result in fines and many other penalties.
How To Prevent An Infinite Mint Attack In Crypto
Crypto projects can majorly lower the probability of becoming the target of an unlimited mint attack and safeguard community members’ investments by insisting on security and adopting preventative measures.
It requires a multifaceted strategy that puts security first at each stage of a crypto project to prevent infinite mint attacks. It is important to have extensive and frequent smart contract audits done by independent security experts. The audits keenly check the code for flaws that might be used in minting infinite amounts of money.
Strong access controls must be set in place; minting powers must only be granted to the authorized parties; and multi-signature wallets come in handy because of their enhanced security. Real-time monitoring tools are important for quick response to potential attacks and identifying any odd transaction patterns or abrupt surges in the supply of tokens.
Projects should have massive backup plans ready to handle all potential attacks rapidly and minimize damage. This includes having open lines of communication with exchanges, wallet providers, and the community at large to expect potential issues and plan solutions.
