Social On-Chain App Stars Arena Suffers $2.9 Million Hack; Team Secures Funds to ‘Close the Gap’

Stars Arena, an on-chain social app built on the Avalanche blockchain, suffered a $2.9 million hack Saturday, when hackers took advantage of a vulnerability in its smart contract, draining funds. Stars Arena’s team has already announced that it has secured the funds to close the gap and will complete a full security audit on the platform.

Stars Arena Suffers $2.9 Million Hack

Stars Arena, a social on-chain platform built on top of Avalanche blockchain, has announced that it suffered a $2.9 million hack that exploited a vulnerability in its smart contracts system Saturday. The Stars Arena

team acknowledged a “major security breach” in a series of posts in X (formerly known as Twitter), where it called on users to stop deposits while they “actively” checked the issue.

In a first preliminary review, Peckshield, a blockchain security and data analytics company, indicated that this attack took advantage of a reentrancy exploit on Stars Arena’s shares contract, which allowed attackers to sell assets on the platform at a higher price than established.

Peckshield reported:

The reentrancy is abused to update the weight when the share/ticket is issued so that 1 share can be sold at a much higher price ~274k $AVAX

Before, the platform had announced that it had plugged another exploit, stating that it was being “targeted by malicious actors in the space that want to steal your money.”

Aftermath

At Coinbase, we’re working hard to help update the financial system by building trusted products that expand the utility and adoption of crypto because we believe crypto and blockchain technology have the ability to increase economic freedom and opportunity around the world. Coinbase chose to become a public company in the US because we believe the US would best be served by embracing this fundamental innovation, but we’re also focused on international markets, many of which are moving forward with strategies to become “crypto hubs.” We would like to see the US take a similar approach, but a regulation by enforcement approach in the US is instead leading to a disappointing trend for crypto development in the US. 

Last year in the UK, the Chancellor of the Exchequer, now Prime Minister Rishi Sunak, made clear his goals for Web3, aiming to make the UK a global crypto hub. The government noted the importance of crypto and digital assets for the future of finance and the jobs the sector creates, and moved to do what some jurisdictions have conspicuously not done: consult with industry leaders to ensure effective regulations are developed. Just this week, at the Conservative Party Conference in Manchester, the Government doubled down on this, with Chancellor Jeremy Hunt stating: “We’re going to make Britain a global leader in the industries of the future – the world’s next Silicon Valley.”

A welcome new report, published by the leading UK think-tank Policy Exchange, describes how blockchain technology will be the underpinning of the next wave of internet development (“Web3”), and crucially how the technology can be harnessed across a broad swathe of economic sectors, not just financial services. It shares recommendations for what the UK Government needs to do to capitalise on the innovative potential of this powerful new technology. This is especially important in the context of increasing regulatory uncertainty across the pond. Several major firms, including ourselves, a16z, and Fidelity have set up operations in the UK. Other companies, for which Web3 is not a pivotal part of their business, like Revolut and Gamestop, are shutting down their blockchain applications in the US to avoid the potential ire of regulators. 

Just last week, I spoke at Leeds Festival of Ideas alongside Sir Jon Cunliffe, Deputy Governor of the Bank of England. I was really encouraged to hear him speak about the Digital Pound initiative. The Bank of England has been a global leader on the future of money, and they recognise the potential for blockchain technology to improve payments by increasing efficiency, lowering costs, and introducing enhanced programmability. Furthermore, the Bank of England will shortly develop standards for stablecoins, and we welcome their approach to allow private sector stablecoins and a possible Digital Pound CBDC to coexist in a mixed payments ecosystem. We have seen other leaders in traditional finance around the world – from the Bank of Spain to the Monetary Authority of Singapore to the Central bank of Brazil, increasingly leaning into crypto out of a recognition that with more than 400m global users of digital assets, this is a financial asset class that supports economic freedom and empowerment. 

Our recent assessment found that 83% of major global financial hubs are providing increasing regulatory clarity on crypto. The UK is part of this figure, and indeed, due to its foresight, has already enjoyed significant success in attracting Web3 startups. Let’s keep this momentum going and make the most of this enormous opportunity. 

Ava Labs founder and CEO Emin Gün Sirer minimized the exploit, explaining that the team behind the platform could recover the funds due to its ties and the platform’s success.

While the issue was developing, Gün Sirer stated:

What is Crypto Gambling? Online Crypto Gambling Explained

“Crypto gambling” is an umbrella term for all activities that combine “games of chance” (iGaming) and cryptocurrency. In short, crypto gambling combines conventional gambling with cryptocurrencies, incorporating blockchain technology into the gambling sector. Here, individuals use digital currencies such as Bitcoin, Ethereum, or other alternative coins to participate in diverse gambling activities like casino games, sports betting, lotteries, poker, and beyond.

For example, an online crypto gambling platform could allow players to deposit one or multiple cryptocurrencies to its platform to access its unique games. Some of the best crypto gambling sites could also allow players to connect their Web3 wallets and retain custody of their crypto funds while gambling. Additionally, some crypto gambling platforms may also offer their own native crypto gambling tokens, which can serve various purposes. They can be used for rewards systems, take the role of casino chips, or they can even serve as tickets for special games and events. Essentially, the sky’s the limit regarding platforms deciding how to utilize their native gambling tokens. 

Online crypto gambling projects can also take different forms. For example, there are special Telegram bots allowing users to place bets. There are also projects that use online platforms that look and feel very similar to an average traditional online casino or online betting platform.

Illustrative art image showing a man depositing coins into a slot machine to play online crypto gambling games

There are already several traditional online iGaming platforms transitioning to crypto gambling. However, they typically just offer players an option to deposit/withdraw cryptocurrency without deploying the true benefits of blockchain technology.

What is Crypto Gambling? FAQs

“What is crypto gambling?” is just one of the many questions related to crypto gambling that newcomers in the Web3 space ask. To address these questions, we’ve prepared an FAQ section below that we know you’ll benefit from!

How Does Crypto Gambling Work?

The best crypto gambling sites utilize the power of blockchain technology, meaning they incorporate at least some levels of decentralization and increased transparency. Furthermore, these platforms incorporate blockchain technology in several ways to enhance transparency, security, and fairness within the gambling ecosystem.

From a user perspective, crypto gambling works in the way that users deposit their cryptocurrency into a specific platform’s account. From there, they use these funds to play various games of chance. Then, they can withdraw their winnings back into their personal crypto/Web3 wallets.

How Do Crypto Casinos Make Money?

There are various ways crypto casinos and other crypto iGaming platforms make money. However, the most popular methods include collecting transaction fees, affiliate commissions, advertising, and something known as a casino’s “house edge” – a statistical advantage that the casino has over players in a particular gambling game. It represents the percentage of each wager the casino expects to retain as profit over the long term. The higher the house edge, the more the casino is expected to win in the long run.

They have quite a few friends and a fantastic product that has proven its virality in the market. The amount lost is only $3m. I’m confident that the hole will be plugged. Let’s now give the team some time to make the code changes required.

Later, Stars Arena announced that they had secured the funds to make users whole and that the platform had enlisted the help of a white hat development team that would “rapidly review the security of the platform.”

Furthermore, the platform detailed it would open again with funds restored after completing a security audit “very soon.” However, it did not offer any estimations on when this will happen.

What do you think about the $2.9 million reentrancy exploit suffered by Stars Arena? Tell us in the comments section below.

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