Linea to Implement Decentralization Strategy Following Pause in Block Production Due to 7M Velocore Breach

Linea Shifts Focus to Decentralization Following Block Production Pause After $7M Velocore Breach


By Hassan Shittu
Updated:
June 3, 2024 10:16 EDT
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Reading Time: 3 mins


The Ethereum Layer-2 blockchain Linea has revealed its strategy to decentralize its network in the wake of a deliberate pause in block production due to a security breach on Velocore.
The decision was prompted by a security breach on Velocore, a decentralized exchange on the network, which led to the unauthorized withdrawal of 700 ETH (equivalent to around $2.6 million) through a third-party bridge.
Linea’s Reaction to Velocore Hack
On June 2nd, Velocore, a decentralized exchange (DEX) operating on Consensys’ zero-knowledge Ethereum Virtual Machine (zkEVM) and Matter Labs’ zkSyncEra, fell victim to a significant exploit affecting its volatile pools. Volatile pools are liquidity pools for assets that do not have a correlation with each other.
The Velocore team reported a loss of approximately $6.8 million worth of ether due to the exploit, which targeted vulnerabilities in its “Balancer-style CPMM pool contract.” They clarified that the exploit was contained within volatile pools, while stable pools were unaffected.
In response to the security breach, Linea halted block production. This decision was made after the blockchain security firm Hexagate alerted Linea to the exploit. The attacker had withdrawn 700 ETH (around $2.6 million) through a third-party bridge.
To mitigate the damage, Linea implemented various ecosystem security measures. These measures included stopping the blockchain sequencer, effectively preventing the exploiter from bridging out additional funds.
“Linea’s team decided to halt block production by pausing the sequencer and blocking attacker addresses to safeguard the users and developers in our ecosystem,” the company stated. “One of the main reasons for pausing the sequencer was that the hacker had acquired and started selling a large amount of tokens for ether.”
“This action was a last resort to protect Linea users,” the team emphasized, underscoring the necessity of the measure. Due to the timing of the incident, immediate contact with Velocore was not feasible.
Similar to other Layer 2 solutions, Linea is currently in a developmental phase. This phase provides the team with certain protections, including the ability to pause the sequencer. This action was taken between blocks 5081800 and 5081801 to minimize the impact of the exploit.
Linea Focuses on Decentralization After Sequencer Incident, Sets $3B TVL Target
In response to the recent security breach on Velocore, Linea announced its intention to decentralize its network. The breach prompted Linea to halt block production following the unauthorized withdrawal of 700 ETH. The core team at Linea emphasized that decentralization is a key goal for their network to prevent similar incidents in the future. Decentralizing the sequencer, which organizes and batches off-chain transactions before submitting them to the Ethereum mainnet, is essential for the network’s continued operation.
“Linea aims to decentralize our network – including the sequencer. Once our network transitions to a decentralized, censorship-resistant environment, Linea’s team will no longer have the ability to pause block production or block addresses,” Linea stated.
Currently, Linea, like most Layer-2 solutions, relies on centralized technical operations to protect ecosystem participants. Despite this reliance, the team is dedicated to creating a permissionless and censorship-resistant environment.
In response to the breach, both Velocore and Linea have requested centralized exchanges (CEX) to freeze the exploited funds. Additionally, Velocore is establishing an on-chain negotiation process to address the situation.
Industry figures have weighed in on the incident. Matter Labs’ CEO, Alex Gluchowski, emphasized the importance of prioritizing decentralization for Layer 2 networks. Declan Fox, Linea’s product lead, reaffirmed the project’s commitment to decentralization in response to Gluchowski’s comments. “Linea is making significant progress towards decentralizing all aspects of the network within a tight timeframe,” Fox stated.