What are the security risks and vulnerabilities in ATOM? A guide to smart contract exploits, network attacks, and exchange custody risks

Atomicals Market Smart Contract Vulnerability: SIGHASH_NONE | ANYONECANPAY Signature Flaw Resulted in 23,000 ATOM User Loss

The Atomicals Market experienced a critical smart contract vulnerability that exposed users to significant financial losses. The flaw stemmed from the improper implementation of Bitcoin script signature flags, specifically the combination of SIGHASH_NONE and ANYONECANPAY parameters in the signing mechanism.

SIGHASH_NONE allows anyone to modify transaction outputs after the signature is applied, while ANYONECANPAY permits signature reuse across multiple transactions. When combined, these flags created an exploitable condition where attackers could hijack pending transactions and redirect funds to their own wallets without invalidating the original signatures. This fundamental cryptographic vulnerability meant that users' authorization for legitimate transactions could be weaponized against them.

The security incident resulted in the loss of 23,000 ATOM tokens, affecting multiple users on the platform. At the time of the vulnerability, this represented substantial value for individual traders and liquidity providers who engaged with the market. The incident was particularly concerning because security researchers had previously warned the Atomicals Market development team about the inherent risks of using SIGHASH_NONE in this context, though the platform had proceeded without adequate protections.

Following the incident, the Atomicals Market team implemented corrective measures by transitioning to SIGHASH_SINGLE combined with ANYONECANPAY, which provides stronger transaction validation constraints. The platform committed to compensating affected users for their losses, demonstrating accountability for the oversight. This incident underscored the critical importance of thorough security audits in decentralized finance protocols before deployment.

Network Attack Timeline: Atomic Wallet Breach Affecting 0.1% of Users and Atomicals Market Hack Compensation Program

Recent cryptocurrency ecosystem incidents have highlighted significant security vulnerabilities affecting major wallet and trading platforms. In June 2023, Atomic Wallet confirmed a security breach impacting its user base. The incident affected less than 0.1 percent of users, with no subsequent cases reported afterward, though unauthorized transactions occurred on affected wallets resulting in substantial losses between 35 to 100 million dollars across various tokens.

Following the Atomic Wallet incident, the platform implemented comprehensive security improvements including engagements with specialized security firms to conduct thorough code audits and vulnerability assessments. Users were advised that the primary risk stemmed from compromised backup phrases, emphasizing the critical importance of protecting recovery information.

The Atomicals Market experienced a separate security incident in January 2022, where users reported unauthorized purchase activities on their accounts. The platform responded with a full reimbursement initiative, offering eligible affected users compensation of 28,000 ATOM tokens claimable within 48 hours through the official platform interface. This incident underscored the necessity for multi-layered security protocols and rapid incident response mechanisms within decentralized finance platforms, establishing precedent for user protection during security breaches.

Exchange Custody Risk: AAX Hong Kong Exchange Collapse and Fund Transfer Concerns Exposing Centralized Platform Vulnerabilities

The collapse of Atom Asset Exchange (AAX) in Hong Kong demonstrates critical vulnerabilities inherent in centralized cryptocurrency platforms. Once commanding over 2 million users as one of Hong Kong's largest crypto exchanges, AAX experienced a dramatic operational failure following exposure to counterparty risks, particularly through connections to the failed FTX platform where the company maintained significant deposits.

The exchange initiated transfer of approximately 24,000 Ethereum valued at $56 million amid operational withdrawal freezes and systematic removal of social media presence. This action preceded complete operational shutdown, leaving investors without recourse. Investigation revealed that AAX's founder retained possession of private keys controlling an estimated HK$230 million ($29.41 million) in user assets while remaining at large despite police involvement. Two individuals faced arrest in connection with alleged $30 million fraud, yet the principal operator evaded apprehension.

Corporate registry analysis uncovered troubling connections between AAX leadership and individuals investigated by Singapore authorities for massive money laundering operations involving organized crime profits. These associations underscored governance failures and due diligence breakdowns.

The AAX incident exposes systematic weaknesses in centralized custody models. Platform operators consolidate user funds without transparent reserve verification, creating single points of failure. Counterparty risk exposure to other failing entities compounds vulnerability. User asset protection depends entirely on operator integrity and operational transparency—safeguards that AAX catastrophically lacked. This case illustrates why regulatory frameworks emphasizing real-time reserve audits and segregated custody arrangements remain essential for protecting retail investors in cryptocurrency trading platforms.

FAQ

Is ATOM coin a good investment?

ATOM is the native token of Cosmos, addressing blockchain scalability and interoperability. With a growing ecosystem, strong community support, and increasing adoption, ATOM demonstrates solid investment potential for those believing in cross-chain solutions.

Can Cosmos hit $100?

Yes, Cosmos could potentially reach $100 by end of 2025. Long-term forecasts suggest even higher values are possible. Current market momentum and adoption trends support optimistic projections for ATOM's price appreciation.

What is the ATOM coin?

ATOM is the native cryptocurrency of Cosmos, a blockchain platform enabling interoperability between networks. It powers transactions, governance, and secures the network through staking.

What is the future of the ATOM coin?

ATOM's future looks promising with projected average price around $13.62, potentially ranging from $13.14 to $15.81. As the Cosmos ecosystem expands and adoption grows, ATOM is positioned for sustained growth and increased utility in the Web3 landscape.