A ripped-off casino. The game of arbitrations between price differences of an asset on different platforms is quite healthy in itself, since it balances and smoothes the price of this asset, avoiding excessive price differentials. But in some cases, arbitration can exploit a clear abuse. This is what a online casino has recently suffered, with a smart guy taking advantage of a deindexing stablecoin USDC against the US dollar.
Multichain protocol hacking exploited for arbitrage
Genius arbitration or a huge scam? We’ll all be the judge of that, but it’s a hell of a story to tell. Arcaan investment company specializing in digital assets. In their latest newsletter » That’s Our Two Satoshis « Arca’s analysts note that a clever fellow has taken advantage of the Multichain protocol hack on July 6, 2023.
Twitter user BobSeinClar (@BobY_Ugo) was one of the first to report the maneuver. In the wake of the Multichain hack, the stablecoins on the blockchain network Fantom (FTM) are depreciated. Thus, Circle’s stablecoin, theUSDChas lost its indexation to the dollar on the FTM network: it is now down to $0.50 instead of 1 dollar.
Address starting with 0xfad7(…) exploited this opportunity by using the online casino BC[.]Game. What happens next? Well, we’ll go into detail, but it’s as if this address was betting on red at roulette, and red kept coming up: the bank finally blew up!
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Those half-price USDCs made him a lot of money
Address 0xfad7(…) profited as BC casino[.]Game on the one hand, accepts USDC in particular from the FTM network to carry out its arbitration maneuver, and on the other hand makes USDC withdrawals to several other blockchains. All this considering that the value of the USDC was set in stone at $1 regardless of the network and trading conditions (big mistake!).
The only additional subtlety for our arbitrage operator was that he had to bet at least once his deposit on the casino, before being able to withdraw the sums obtained. Thus, the process that enabled him to use USDC at 0.50 dollar (on FTM) to obtain USDC at 1 dollar (on other blockchains) was as follows:
« Buy FTMs on a centralized crypto exchange -> withdraw them on the Fantom network -> exchange them for USDCs on Spookyswap -> send them to BC.Game -> make bets on low-risk games to reach the withdrawal threshold -> withdraw stablecoins on another network, with USDCs worth $1 again. »
Evidently, the casino ended up realize the problem. Withdrawals were halted, and the USDC wallets in the FTM network held by BC[.]Game were quickly sold and emptied. We knew that the haemorrhage caused by the hack of the Multichain protocol had been violent. But, in addition to this main hack, the strong instability that it brought about seems to have made collateral victims not necessarily expected.
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