More_Ad_6196 OP t1_j5katxh wrote on January 23, 2023 at 4:50 PM

Reply to comment by desferecat in eli5 - Wrapped tokens - crypto by More_Ad_6196

Thank you, so there is no loophole that people are using to use the ETH while the WETH is in circulation?

desferecat t1_j5kf5pr wrote on January 23, 2023 at 5:17 PM

There's no loophole, you can use your ETH while also using WETH. When you're converiting ETH into WETH, you are essentially creating a new token that is tied to the value of ETH. So you can still use your original ETH while also using WETH. You can convert your ETH to WETH and back as needed. The original ETH will be locked up in the smart contract until you decide to convert.

Owlstorm t1_j5kngrt wrote on January 23, 2023 at 6:08 PM

There are a few loopholes.

51% is an obvious one- send bitcoin to get WBTC and then reverse the transaction on the bitcoin chain. Sell the WBTC to double your "money". It's one of the big defi piñatas.

Not happening with bitcoin any time soon (we'd need several more halvings), but you can see it with smaller tokens.

Also the usual boring hacking stuff like input validation and social engineering.

More_Ad_6196 OP t1_j5ks37k wrote on January 23, 2023 at 6:37 PM

So to put it in ELI5 terms, someone can take a Bitcoin, wrap it, sell the WBTC on Ethereums chain and reverse the transaction to get back their BTC while profiting off of the WBTC sale?

Owlstorm t1_j5ksie0 wrote on January 23, 2023 at 6:39 PM

Yes

More_Ad_6196 OP t1_j5ksnfj wrote on January 23, 2023 at 6:40 PM

Woah

lemoinem t1_j5lr8bz wrote on January 23, 2023 at 10:17 PM

Not specific to wrapped coins though. Any transaction that has part of it on the blockchain and part off the blockchain is vulnerable, by design.

Prep (send) the ON part, transact (receive) the OFF part, Revert (take back) the ON part.

You now have both the money associated to both the ON and OFF part.

That's essentially doing a transaction with a credit card and doing a charge back once you recieved the goods. Nothing new here...