Yearn Finance V1 Exploit: $300K Vanishes in DeFi Security Wake-Up Call
A sophisticated exploit has just drained $300,000 from Yearn Finance's V1 protocol, spotlighting the persistent vulnerabilities lurking in legacy DeFi systems.
The Anatomy of a Modern Heist
Attackers didn't just break in—they found a seam in the code's logic. The exploit leveraged a flaw in the interaction between vault contracts and their underlying strategies, allowing funds to be siphoned without triggering standard security alarms. It's a stark reminder that in DeFi, complexity is the enemy of security.
Why V1 Still Matters
While Yearn has moved on to newer iterations, significant value remains locked in V1 contracts. This incident isn't about outdated tech—it's about the long tail of risk that every protocol creates when it launches a new version. Legacy code becomes someone else's problem, until suddenly it's everyone's problem.
The $300,000 Question
The relatively modest sum—by crypto hack standards—raises eyebrows. Was this a targeted test? A proof-of-concept? Or simply all that was left in that particular vault? The precision suggests this was more surgical than smash-and-grab.
DeFi's promise was to cut out the middleman. Turns out, it also cut out the security department—and the insurance underwriter. The market barely flinched at the news, treating a $300,000 exploit as just another cost of doing business in the wild west of yield farming. Maybe that's the most cynical finance jab of all: we've normalized getting robbed.
Legacy iEarn contracts trigger vulnerability
Yearn Finance confirmed that the exploit targeted iEarn’s Immutable TUSD contract, deployed over 2,100 days ago, unrelated to current Yearn vaults. The team emphasized that modern Yearn v2 Vaults remain unaffected.
We're aware of an issue with iEarn's immutable TUSD contract, deployed over 2100 days ago, unrelated to Yearn vaults.
The problem is exclusive to iEarn and does not impact current Yearn contracts or vaults.
The incident is similar to this 2023 iEarn USDT hack. https://t.co/osI43q2udb
Yearn explained, “This problem is exclusive to iEarn and does not impact current Yearn contracts or vaults.” Similar issues in 2023 with the iEarn USDT contract had led to multiple Curve pools being exploited, impacting liquidity providers downstream. Historically, Yearn’s legacy v1 Vaults wrapped affected LP tokens, which meant some users indirectly felt the consequences.
In late November, the yETH stableswap pool also suffered an $8 million loss due to a subtle arithmetic flaw in its custom Curve-based contract. The yETH–WETH pool lost another $900,000. Yearn’s proactive recovery in December retrieved $2.4 million of the yETH exploit, demonstrating coordinated efforts with partners Plume and Dinero.
DeFi attack patterns and unexpected outcomes
The hacker relied on connected contracts, a small amount of starting ETH, and well-timed flash loans to carry out the attack. In a similar case, the Raft protocol lost $3.3 million in ETH due to flaws in its R stablecoin. Interestingly, the hacker sent only 18 ETH through Tornado Cash and ended up destroying 1,570 ETH, leaving just 14 ETH behind.
Igor Igamberdiev, Head of Research at Wintermute, explained, “Coins went to the null address, which has no private key.” Hence, the attacker inadvertently lost a portion of the stolen ETH.
These attacks have highlighted vulnerabilities inherent in existing DeFi smart contracts, specifically pre-existent DeFi smart contracts that fail to conform to current governance and security best practices. Furthermore, attackers are executing complex cross-protocol transactions using platforms and flash loans.
The recent hack of Yearn Finance V1 illustrates the need for scrutiny of old DeFi contract codes. Luckily, the Current Vaults are safe, but people must exercise caution when dealing with old codes.
Also Read: Michael Saylor Says Quantum Will Not Break But ‘Harden’ Bitcoin
