Vyper Reentrancy Lock Vulnerability: Full Path Analysis of Curve Protocol Attack

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In July 2025, a major blockchain security incident shook the decentralized finance (DeFi) ecosystem when multiple liquidity pools on Curve Finance were exploited due to a critical vulnerability in a specific version of the Vyper programming language. The root cause was traced back to a flaw in the reentrancy lock mechanism, which allowed attackers to manipulate liquidity operations and drain funds across several ETH-based pools.

This article provides a comprehensive technical breakdown of the attack vector, explains how the Vyper reentrancy lock failure led to real-world financial losses, and highlights essential best practices for developers building secure smart contracts.

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Event Overview

Between July 30, 21:10 and July 31, 06:00 UTC, multiple Curve liquidity pools—including pETH/ETH, msETH/ETH, alETH/ETH, and CRV/ETH—were targeted in a coordinated attack. Despite differences in underlying assets, all compromised contracts shared one common denominator: they were compiled using vulnerable versions of Vyper (0.2.15, 0.2.16, or 0.3.0).

These versions contained a critical bug that disabled the reentrancy protection mechanism—a cornerstone of secure DeFi contract design—making them susceptible to recursive call exploits.

Although the attack spanned several pools, the exploitation pattern remained consistent. We will focus on the pETH/ETH pool attack as a representative case study to illustrate the full attack path.

Technical Breakdown: The pETH/ETH Pool Exploit

The primary transaction analyzed is:

0xa84aa065ce61dbb1eb50ab6ae67fc31a9da50dd2c74eefd561661bfce2f1620c

This attack was initiated by address 0x6ec2...8538, which invoked a malicious contract at 0x9420...a6ab. This contract then deployed a transient attacker contract (0x466b...0f04) whose constructor function executed the entire exploit sequence.

Step 1: Flash Loan Acquisition

The attacker began by borrowing 80,000 WETH via a flash loan from Balancer, immediately converting it into ETH for use in subsequent interactions with Curve.

Step 2: Initial Liquidity Provision

Using 40,000 ETH from the flash loan, the attacker provided liquidity to the pETH/ETH Curve pool, receiving approximately 32,431.41 LP tokens in return. This step set up the initial state required for the reentrancy exploit.

Step 3: Triggering Reentrancy Through Withdrawal

Here lies the core of the exploit.

The attacker called the remove_liquidity function on the pool—but instead of completing cleanly, this call triggered a reentrant loop. How?

During token transfers within the withdrawal process, the contract invoked the attacker’s fallback function. Inside this fallback, the attacker re-entered the same pool by calling add_liquidity, effectively depositing another 40,000 ETH and minting an additional ~82,182.76 LP tokens.

Normally, such reentrant behavior should be blocked by a reentrancy guard—a standard security measure that locks sensitive functions during execution.

However, in this case, the reentrancy lock failed silently, allowing the recursive calls to proceed unchecked.

Step 4: Multi-Stage Fund Extraction

After successfully bypassing the lock, the attacker performed a series of withdrawals:

Over 70,000 LP tokens remained in the attacker’s contract—likely held for potential future manipulation or delayed extraction.

Step 5: Asset Conversion and Profit Realization

The attacker then swapped approximately 4,924.94 pETH for 4,285.10 ETH via the Curve pool. Finally:

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Root Cause Analysis: Why Did the Reentrancy Lock Fail?

Despite having reentrancy guards implemented in code, these protections were rendered ineffective due to a flaw in Vyper’s storage layout handling.

How Reentrancy Locks Should Work

In secure smart contracts, a reentrancy lock typically uses a storage slot (e.g., locked = True) at the start of a sensitive function. Any nested call attempting to re-enter will fail if the lock is active.

What Went Wrong in Vyper

Upon decompiling the attacked contract (available here), analysts discovered that:

The storage slots used for reentrancy locks in add_liquidity and remove_liquidity functions were not consistent.

This inconsistency stemmed from changes introduced in Vyper v0.2.15 and later, specifically in the data_positions.py file responsible for allocating storage slots.

In these versions:

As a result, even though both functions had "locks," they didn’t share the same locking context—making the mechanism functionally useless.

Official Confirmation and Fix

The Vyper team acknowledged the issue and confirmed that:

Core Keywords Identified

To enhance SEO visibility and align with user search intent, the following keywords have been naturally integrated throughout this analysis:

Frequently Asked Questions (FAQ)

Q: Which Curve pools were affected by this attack?

A: The exploited pools included pETH/ETH, msETH/ETH, alETH/ETH, and CRV/ETH—all sharing contracts compiled with vulnerable Vyper versions.

Q: Can reentrancy guards ever fail even when implemented correctly?

A: Yes. In this case, the logic was correct, but the compiler mismanaged storage allocation—highlighting that even proper coding patterns can fail if underlying tooling is flawed.

Q: How can developers avoid similar risks?

A: Always use stable compiler versions, audit dependencies rigorously, and test edge cases involving recursive calls. Prefer well-audited libraries like OpenZeppelin’s ReentrancyGuard when possible.

Q: Was user funds fully recovered after the attack?

A: While some protocols implemented emergency measures, full recovery has not been publicly confirmed. The incident underscores the irreversible nature of on-chain exploits.

Q: Is Vyper still safe to use today?

A: As of version v0.3.1 and above, the reentrancy issue has been resolved. However, developers should stay updated with official releases and community audits before deploying production contracts.

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Final Thoughts and Developer Recommendations

The Curve attack serves as a stark reminder that infrastructure-level vulnerabilities—even in widely trusted tools like compilers—can have cascading consequences across the entire DeFi ecosystem.

Key takeaways:

Security in blockchain development is not a one-time task—it requires continuous vigilance, community collaboration, and proactive defense strategies.

By understanding past exploits like this Vyper reentrancy failure, developers and users alike can build more resilient systems for the future of decentralized finance.