Hyperliquid (HYPE) Drops 20% Over Alleged North Korea Trading on Platform

Hyperliquid (HYPE), the native token of the layer-1 network and decentralized perpetual trading platform Hyperliquid has lost over 20% of its value in the past 24 hours after on-chain analysts alerted the crypto community of an impending attack on the network.

Several blockchain experts have identified addresses belonging to notorious North Korean hacker groups trading on Hyperliquid. Although these addresses have accumulated losses of more than $700,000, analysts believe the trading activities aim to test the stability of Hyperliquid’s system as the network has become a potential target for attacks.

While the discourse continues on X, HYPE is down 22%, per data from CoinMarketCap. Since December 22, the cryptocurrency has fallen from $33.81 to $26.62 at the time of writing.

Potential Target For Attacks

The pseudonymous analyst OxCygaar explained how the attacks could go if the North Korean hackers eventually hacked Hyperliquid’s system.

Hyperliquid has four validators and needs three signatures to perform functions, including bridge transfers. A Hyperliquid bridge is currently deployed on the Arbitrum network and holds $2.3 billion in USD Coin (USDC).

Assuming the North Korean hackers compromise three out of the four validators and place a withdrawal request for all of the USDC in the bridge to be sent to a malicious address, the request will be processed with no issues, and the $2.3 billion USDC will be moved to the attacker’s address.

Possible Remedies And Preventive Measures

However, two defense measures can prevent the USDC from being lost forever.

OxCygaar explained that the USDC issuer, Circle, can blacklist the attacker’s address at the contract level, freezing the funds and preventing the hackers from trading the stolen assets. With time, Circle can return the funds to the Hyperliquid bridge.

The second defense measure can come from the Arbitrum chain, which has a 9/12 multisig validator security system and an eight-day dispute window. Assuming the hackers bypass Circle’s blacklist by swapping the USDC into other tokens, the Arbitrum security council has the power to vote and change the state of the chain to reverse the transactions during the dispute window.

Meanwhile, the pseudonymous analyst Tayvano, who first alerted the crypto community to North Korean hacker trading activities on Hyperliquid, has offered to help harden the network’s security system but has not received a response from the chain’s team.

“I am quite concerned that you guys are at increased risk due to the fact we know that these specific threat actors are now intimately familiar with your platform,” Tayvano stated.