Virtuals Protocol (VIRTUAL), which led the artificial intelligence (AI) cryptocurrency boom and was a top performer this week, is currently collapsing. The sudden bearish reversal comes as blockchain security researchers exposed reported security vulnerabilities that were ignored by the Virtuals team.
In short, jinu (@lj1nu) went to X on January 2nd and 3rd to publicly report security vulnerabilities he discovered while “scanning” the Virtuals Protocol code. However, the public report only became necessary after Jin-woo’s private report was ignored on the team’s Discord server.
“They (Virtuals) seem to be audited, but when I contacted them they said the team does not run bug bounties. I have closed the Discord channel I created.
This is not ideal, nor is it the standard way for open source software to deal with reported threats, and raises alarm and concern. “We are surprised that a project as big and popular as @virtuals_io doesn’t care about security,” the researchers concluded.
Describing security vulnerabilities in major AI cryptographic virtual protocols
Interestingly, another security expert, 33Audits (@solidityauditor), said he and “a few others” had previously run into the same problem, only to “boot” from the official servers of both Discord and Telegram. I made it clear that I was trying to report it.
I tried to report this with a few others and they booted me from Discord and stopped responding on tg. they give nothing
— 33Audits (@solidityauditor) January 3, 2025
However, in a subsequent comment, jinu explained that after his post was successful, the Virtuals team quickly fixed the reported security vulnerability. The experts shared the repaired source code and the new contract address, which is now said to be secure. “They patched it very quickly,” he said.
In summary, this vulnerability allowed an attacker to predict and create Uniswap V2 token pairs before Virtuals. This may prevent the protocol from properly launching new tokens.
If someone else creates the pair first, Virtuals will not be able to proceed with the launch after reaching a certain price threshold within the platform. Essentially, a predictable method is used to create the token, allowing an attacker to act first.
Virtual protocol (VIRTUAL) price crash
At the time of writing, VIRTUAL is trading at $4.29, down 7.19% in the past 24 hours. While the issue remained, the token traded as low as $4.10, but has now recovered slightly after an apparent correction.
According to a report from Finbold yesterday, the AI cryptocurrency scene is experiencing a massive surge, with a market capitalization of over $10 billion. Over the past 7 days, VIRTUAL has amassed a 30% gain, but investors and traders are currently dealing with fear, uncertainty, and doubt (FUD) regarding recent events.
This issue had the potential to impact users by delaying the release of their tokens, investors by risking the value of their tokens, and developers by undermining trust. Although it has already been corrected, the team’s actions damaged market confidence and directly affected price performance.
Featured images from Shutterstock
