SIR.trading’s Entire $355K TVL Wiped Out in Smart Contract Hack

Exploit Details

According to security analytics firms TenArmor and Decurity, who were among the first to detect the breach, the attacker exploited a vulnerability in SIR.trading's Vault smart contract. The exploit centered around a function called uniswapV3SwapCallback, which interacts with transient storage, a gas-saving innovation introduced in Ethereum’s Dencun upgrade via EIP-1153.

Decurity explained that the attacker cleverly manipulated the callback function by overwriting critical temporary storage data during execution. By taking advantage of a flaw in how the protocol handled transient storage, the attacker was able to convince the contract that their address was authorized, thereby draining the vault.

Funds Laundered via Privacy Tool

Shortly after the attack, the stolen ETH was funneled through RailGun, a privacy-focused transaction mixer on Ethereum. RailGun makes it significantly more difficult to trace the destination of stolen funds, a tactic increasingly used by hackers to evade on-chain monitoring tools.

TenArmor, which was monitoring SIR.trading’s smart contracts at the time, confirmed that 100% of the TVL was removed in a matter of minutes.

Developer Responds

SIR.trading’s pseudonymous founder, known as Xatarrer, took to social media shortly after the exploit was discovered. In a statement shared with the community, they called it “the worst news a protocol could receive.”

Security Wake-Up Call for DeFi Builders

The exploit has reignited debates about security tradeoffs in DeFi development , especially when integrating brand-new blockchain features. Ethereum’s Dencun upgrade, which went live earlier this month, brought with it EIP-1153, enabling transient storage to reduce gas costs. However, as this incident shows, optimization can come at a cost if not carefully audited.

Other protocols using transient storage are now being urged to reexamine their implementations for similar vulnerabilities. Meanwhile, security experts are calling for updated best practices and tooling to help identify edge-case vulnerabilities in transient storage logic.

The breach has also highlighted a cultural tension within DeFi: the race to innovate often outpaces the frameworks meant to secure that innovation. Many teams, eager to leverage the latest Ethereum features, may skip thorough threat modeling in favor of faster deployment. This mindset, while pushing boundaries, can inadvertently open the door to novel exploits — especially when new EIPs introduce unfamiliar attack surfaces.

Where DeFi Goes from Here

There is currently no indication that the attacker has been identified or that any of the funds will be recovered. Community members have floated the idea of a “white hat return,” but so far, there has been no response from the perpetrator.

While the financial loss from the SIR.trading hack is modest compared to some of the larger DeFi exploits, the symbolic damage is significant. It underscores how fragile DeFi infrastructure can be, especially when deploying unaudited or experimental features in production.

As DeFi protocols continue to evolve alongside the Ethereum network, this incident serves as a sobering reminder: innovation without caution can be catastrophic.