Flow, the Layer 1 blockchain built by Dapper Labs, recently encountered a major problem. On December 27th, on-chain analyst Wazz detected some suspicious transaction activity. Upon further investigation, it was found that the attacker used a wallet created over half a year ago to rapidly mint wrapped FLOW (WFLOW) through the TransparentUpgradeableProxy contract.

Interestingly, security expert Taylor Monahan analyzed the characteristics of this incident and concluded that it was more likely due to private key theft rather than a conventional smart contract vulnerability. The damage not only affected Flow itself but also impacted cross-chain assets such as WBTC, WETH, and various stablecoins. The preliminary estimated economic loss ranges between $3.9 million and $4 million.

The market reacted very quickly. The price of FLOW dropped from about $0.17 to a low of $0.079, a decline of over 40%. Afterwards, the price fluctuated between $0.10 and $0.11. Major South Korean exchanges like Upbit, Bithumb, and Coinbase also temporarily suspended related transfers.

Flow's official statement on Sunday announced that they would abandon the previously planned ledger rollback solution and instead adopt an "isolated recovery plan" to address this security incident. This shift indicates that the team, after weighing various factors, chose a relatively cautious recovery approach.