$74,000 instantly evaporated. How dangerous is the reentrancy vulnerability in the Arbitrum protocol?

FutureSwap has been attacked again on Arbitrum. According to the latest reports, blockchain security firm BlockSec Phalcon detected that this liquidity mining protocol was compromised through a carefully designed two-step process, resulting in a loss of approximately $74,000. This was not a typical flash loan attack or a simple parameter error, but a classic yet dangerous reentrancy vulnerability. More concerning is that this reflects a recent trend of frequent security issues in the DeFi ecosystem.

How the Attack Happened

Reentrancy vulnerabilities sound complex, but they are essentially a game of timing. Attackers exploit a “gap” during the execution of a smart contract.

The process on FutureSwap is as follows: users deposit assets to receive LP tokens, which they can then withdraw. However, FutureSwap has a 3-day cooldown period to prevent rapid in-and-out movements. The attacker found a loophole here.

The Ingenious Two-Step Process

Step One: Reentrancy Attack During Minting

The attacker exploited a vulnerability in the 0x5308fcb1 function when providing liquidity. The key point is that this function allows reentry into the contract before updating internal accounting. The attacker re-entered the same function before the contract recorded the actual amount of assets deposited. As a result, they minted LP tokens far exceeding the proportion of their actual deposit.

In simple terms, they deposited 100 units of currency but, through reentrancy, received LP tokens equivalent to 1000 units. This is the first step of “whitewashing” with nothing.

Step Two: Withdrawal Phase to Bypass Restrictions

But that wasn’t enough. The 3-day cooldown period was originally designed to prevent such exploits. The attacker waited for 3 days, then executed the withdrawal. They burned the illegally minted LP tokens and exchanged them for the actual collateral. The result was that they exchanged fake LP tokens for real assets.

This completed the entire theft: from nothing to something, from virtual to real.

Why This Is Dangerous

Although the loss in this attack was only about $74,000, the underlying issues are much larger:

1. Reentrancy is a “classic nightmare” in DeFi. As early as the 2016 TheDAO attack, reentrancy vulnerabilities caused losses of millions of dollars. Ten years later, this vulnerability still harms protocols.

2. Cooldown periods are not foolproof. FutureSwap believed that a 3-day cooldown could prevent rapid arbitrage, but it cannot prevent reentrancy attacks. Attackers do not just quickly enter and exit during the cooldown; they reenter during the minting phase to obtain excess LP tokens.

3. This reflects recent security trend issues in DeFi. Just the day before (January 13), YO Protocol experienced an abnormal token swap event on Ethereum, exchanging only $122,000 USDC from $3.84 million stkGHO. Although this was due to parameter misconfiguration rather than a bug, it still highlights the high risks in DeFi protocols.

Implications for the Arbitrum Ecosystem

FutureSwap being “attacked again” indicates prior security issues. The exposure of this reentrancy vulnerability serves as a warning for the entire Arbitrum ecosystem:

• Liquidity mining protocols need more rigorous security audits
• Reentrancy protections cannot rely solely on simple cooldown periods
• Smart contracts should follow the “check-effects-interactions” pattern, ensuring internal state updates before external calls

Summary

Although the recent attack on FutureSwap resulted in relatively small losses, the revealed reentrancy vulnerability is a systemic risk in the DeFi ecosystem. The attacker used a two-step clever process: first, exploiting reentrancy to mint excessive LP tokens, then, after the cooldown, withdrawing and exchanging fake assets for real ones. This reminds us that DeFi security issues are far from resolved; risks range from parameter errors to technical bugs, everywhere. For users, choosing protocols with thorough audits remains the most fundamental safeguard.