The world of Decentralized Finance (DeFi) was once again rocked in June 2025 with a significant exploit targeting the ALEX Protocol, a prominent Bitcoin DeFi platform built on the Stacks blockchain. While the exact figures varied in initial reports, the incident led to substantial losses, underscoring the ongoing security challenges faced by the burgeoning DeFi ecosystem

What is ALEX Protocol?

Before diving into the hack, let’s understand what ALEX Protocol is. ALEX (Automated Liquidity Exchange) is an open-source DeFi protocol that aims to bring sophisticated financial primitives to Bitcoin. It operates on the Stacks blockchain, which enables smart contracts to be executed on top of Bitcoin, leveraging Bitcoin’s security for settlement. Essentially, ALEX allows users to trade, lend, and borrow crypto assets, with a focus on utilizing Bitcoin as the underlying asset. It offers features like decentralized bonds, Automated Market Maker (AMM) pools, and a launchpad for new projects in the Bitcoin ecosystem.

ALEX Protocol Hack Explained: How It Happened and What Was Stolen

The ALEX Protocol hack, which occurred on June 6, 2025, involved a sophisticated attack that exploited a critical vulnerability in the protocol’s self-listing verification logic. This flaw allowed the attacker to drain liquidity from several asset pools, leading to millions of dollars in losses.

According to reports, the attacker initiated the exploit by creating a fake token with a malicious transfer function embedded within its smart contract. They then created a liquidity pool using this fake token and a legitimate asset, like STX (Stacks token). Crucially, the attacker managed to call a specific function, set-approved-token, which granted the malicious smart contract vault-level permissions within the ALEX Protocol system.

With this elevated access, the attacker was able to manipulate a flag within ALEX Lab’s system, specifically set-enable-farming, which activated the malicious contract’s transfer function. When a standard swap-x-for-y (token swap) call was performed, the ALEX Protocol’s legitimate contract inadvertently called the fake transfer function within the malicious token contract. The clever part of the attack involved the use of as-contract, which made it appear as though the ALEX vault itself was initiating the transfer, effectively bypassing the protocol’s internal access controls. This allowed the attacker to siphon off significant amounts of various assets.

Stolen Assets (Approximate Figures):

• Approximately 8.4 million Stacks (STX) tokens
• 21.85 Stacks Bitcoin (sBTC)
• 149,850 in USDC and USDt (stablecoins)
• 2.8 Wrapped Bitcoin (WBTC)

The total estimated loss varied, with some reports citing $8.3 million and others closer to $16.18 million, depending on the inclusion of all affected tokens.

Previous Incidents and Lessons Learned

This was not the first security incident for ALEX Protocol. In May 2024, the platform also suffered an exploit involving its cross-chain bridge infrastructure, resulting in a loss of $4.3 million. That incident was tentatively linked to the notorious North Korean cybercrime group Lazarus. These repeated attacks highlight a critical challenge in the DeFi space: the complexity of smart contracts and the ever-evolving nature of attack vectors.

The June 2025 hack specifically pointed to “failed access controls” as the root cause. This emphasizes the vital importance of thorough smart contract audits, not just for new features but for all existing code, to identify and mitigate vulnerabilities before they can be exploited.

ALEX Protocol’s Response and Reimbursement

In the immediate aftermath, the Alex Lab Foundation, the organization behind the protocol, pledged to fully reimburse all affected users. They outlined a structured claims process:

• Compensation would be issued in USDC tokens.
• Reimbursement calculations were based on average on-chain exchange rates during a specific window (10:00 am UTC to 2:00 pm UTC) on the day of the attack.
• Affected wallets were to receive an on-chain notification by June 8, including a personalized claim form.
• Users were required to submit the form and a receiving wallet address by June 10.
• The team committed to verifying claims and distributing payments within seven days.

While the technical details of the exploit were initially scarce, ALEX Protocol was expected to release a comprehensive post-mortem report to shed more light on the incident and the preventative measures being implemented.

Stay updated on official announcements: For the latest updates from ALEX Protocol, users are encouraged to follow their official Twitter account: @AlexLabCoin (Please note: This is a placeholder for the actual Twitter handle, as direct links to specific tweets about the hack might become outdated. Always verify official sources).

The Broader Implications for DeFi Security

The ALEX Protocol hack serves as a stark reminder of the inherent risks in the DeFi landscape. While decentralization offers numerous benefits, it also places a greater onus on users and developers to prioritize security.

Key takeaways for the DeFi community:

• Rigorous Smart Contract Audits: This cannot be stressed enough. Protocols must undergo multiple, independent audits by reputable security firms, covering all code, including existing and newly deployed features.
• Robust Access Controls: Thoroughly designed and tested access control mechanisms are crucial to prevent unauthorized interactions with sensitive protocol functions.
• Decentralized Security Practices: While not directly related to this exploit, users should always practice good security hygiene, including using hardware wallets for storing private keys and being wary of phishing attempts.
• Community Vigilance: An active and engaged community can often help identify potential issues, though the ultimate responsibility lies with the protocol developers.
• Incident Response Plans: Clear and swift communication, along with a well-defined reimbursement plan, are essential for maintaining user trust in the event of a security breach.

The DeFi space is still evolving, and with innovation comes risk. As protocols like ALEX continue to push the boundaries of what’s possible on the blockchain, the commitment to robust security practices will be paramount for fostering long-term trust and widespread adoption.