Preliminary Analysis of the Balancer V2 Attack Incident

This pool uses Stable Math (a StableSwap model based on Curve), and the invariant D represents the pool's "virtual total value". The price of BPT (Pool's LP Token) is approximately: [Image of BPT price] From the formula above, it can be seen that if D can be made smaller on paper (even if no funds are actually lost), the price of BPT will be cheaper. BTP represents a pool share, used to calculate how many pool reserves an attacker can obtain when withdrawing liquidity. Therefore, if an attacker can acquire more BPT, they can profit when withdrawing liquidity. Attack Analysis Taking an attack transaction on Arbitrum as an example, the batchSwap operation can be divided into three phases: Phase 1: The attacker exchanges BPT for the underlying asset to precisely adjust the balance of one of the tokens (cbETH) to the rounding boundary (quantity = 9). This step sets the stage for the precision loss in the next phase. Phase Two: The attackers used a carefully crafted quantity (= 8) to swap between another underlying asset (wstETH) and cbETH. Due to rounding down when scaling the token quantity, the calculated Δx was slightly smaller (from 8.918 to 8), resulting in an underestimation of Δy and a smaller invariant D (derived from Curve's StableSwap model). Since BPT price = D / totalSupply, the BPT price was artificially suppressed. Phase Three: The attacker reverses the underlying assets back to BPT, restoring balance within the pool while profiting from the depressed BPT price – gaining more BPT tokens. Finally, the attacker uses another profit-taking transaction to withdraw liquidity, thereby using the extra BPT to acquire other underlying assets (cbETH and wstETH) in the pool for profit. Attack Transaction: leaf="">https://app.blocksec.com/explorer/tx/arbitrum/0x7da32ebc615d0f29a24cacf9d18254bea3a2c730084c690ee40238b1d8b55773

Profitable trades:

https://app.blocksec.com/explorer/tx/arbitrum/0x4e5be713d986bcf4afb2ba7362525622acf9c95310bd77cd5911e7ef12d871a9

Reference:

[1] https://x.com/Phalcon_xyz/status/1985262010347696312

[2] https://x.com/Phalcon_xyz/status/1985302779263643915

[3] https://docs-v2.balancer.fi/concepts/pools/composable-stable.html