This story was originally published on HackerNoon at: https://hackernoon.com/balancer-v2-exploit-explained-inside-the-smart-contract-rounding-error-that-cost-$120m.
How a rounding bug in Balancer V2’s Composable Stable Pools led to a $120M exploit—and why continuous audits are now a DeFi must.
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Balancer V2’s Composable Stable Pools, modeled after Curve’s StableSwap, use math-driven invariants to minimize slippage in like-valued token swaps. However, a persistent rounding-down behavior in the _upscale function—introduced in 2021—created a precision loss that attackers exploited in low-liquidity states, draining over $120 million. The incident underscores the need for continuous, holistic security partnerships and evolving audit frameworks in the DeFi ecosystem, rather than isolated, one-off reviews.