BunniXYZ liquidity exploit exposes major DeFi vulnerability across chains

The BunniXYZ liquidity exploit has shaken the decentralized finance (DeFi) sector, highlighting ongoing vulnerabilities in smart contract architecture. In this incident, BunniXYZ, a decentralized exchange (DEX), suffered an $8.4 million loss due to sophisticated liquidity manipulation tied to its Liquidity Density Function (LDF). The exploit spanned two major blockchains—Unichain and Ethereum—using the Across Protocol as a bridge to move stolen funds. This case reinforces the importance of robust on-chain mechanics and transparent smart contract auditing.

How the BunniXYZ hack happened

The attackers behind the BunniXYZ liquidity exploit cunningly manipulated smart contract mechanics. Their key target was Bunni’s Liquidity Density Function (LDF), a component that manages how liquidity is distributed across price ranges. By executing trades of exact sizes, the attackers broke the contract’s internal rebalancing logic. This manipulation allowed them to take control of more liquidity shares than they were entitled to.

This wasn’t a typical flash loan attack—it was much more deliberate. The exploitation occurred in phases, with $6 million drained over Unichain and another $2.4 million stolen on Ethereum. The use of the Across Protocol blockchain bridge enabled the transfer of funds between chains, showcasing just how dangerous multi-chain exploits can become when core protocol mechanics break down.

Liquidity manipulation and vulnerability in DEXs

Liquidity manipulation remains one of the most feared forms of attack within the DeFi ecosystem. In the case of BunniXYZ, the attackers didn’t exploit an obvious code flaw—they took advantage of how liquidity is calculated over small and frequent transactions. The system couldn’t rebalance fast enough, and the Liquidity Density Function misattributed pool ownership.

This incident mirrors other DEX exploit patterns where attackers apply game theory over time rather than brute-force hacks. BunniXYZ paused all contracts after the attack and is still investigating the exact vectors used. Experts, including Victor Tran of Kyber Network, say that the rebalancing flaw was likely known but underestimated during protocol deployment.

Cross-chain risks via Across Protocol

One of the most troubling aspects of the BunniXYZ liquidity exploit was the use of the Across Protocol to transport funds from Unichain to Ethereum. Bridges like Across Protocol play a crucial role in DeFi interoperability but are also a favored vector for hackers. Once assets leave their original chain, recovering them becomes significantly harder.

Because this DEX exploit involved Unichain and Ethereum, it brought attention to the inherent risks of cross-chain liquidity operations. Funds moved through the blockchain bridge before any on-chain alert could propagate—proving once again that time is of the essence during exploits. BunniXYZ now faces the challenge of not just halting the spread of the exploit but also potentially tracing stolen assets across chains.

Rebalancing flaw insights from on-chain analysis

Rebalancing flaws have plagued several DeFi protocols, but what makes this case unique is the precision of the trades executed. On-chain analysts point to granular liquidity manipulation as the root cause behind the liquidity exploit. Tokens were withdrawn gradually, and each trade was crafted to tip the LDF math in the attacker’s favor without triggering alerts.

Victor Tran’s post-mortem analysis suggests that the problem stemmed from an under-tested algorithm within BunniXYZ’s core rebalancing function. His breakdown of transaction flows shows a repeatable pattern, which means other protocols using similar mathematical assumptions could also be at risk if they rely on non-linear liquidity spreading.

What comes next for BunniXYZ?

BunniXYZ has already paused smart contract activities and launched a full-scale investigation. As protocols mature, the hope is that DEXs like BunniXYZ will implement better external code reviews and simulation-based stress testing before going live. Community efforts are underway to trace the stolen assets through chain analytics tools and find a solution for restitution.

This exploit may also spur regulatory interest or influence future DeFi insurance products that can mitigate similar events. If anything, the BunniXYZ liquidity exploit serves as yet another wake-up call about how fragile some DeFi systems still are—even those perceived as innovative.

Lessons for the DeFi community

For developers and DeFi users alike, this hack reinforces the importance of understanding protocol mechanics—not just relying on their promises. Saturated liquidity zones, faulty LDF logic, and insufficient bridge monitoring open the door to exploits. As multi-chain operations grow more popular, the need for real-time threat detection and unified security standards is more urgent than ever.

The blockchain space must treat smarter trading algorithms not just as optimization tools, but also as potential weapons. The BunniXYZ liquidity exploit is a case study in how economic exploits can go undetected until it’s too late.

Sources to this article

Victor Tran (2024). On-chain analysis of BunniXYZ LDF exploit. Kyber Network blog.

BunniXYZ (2024). Official statement via Twitter/X on post-exploit action.

Across Protocol (2024). Technical whitepaper on bridging Unichain and Ethereum.

Unichain documentation (2024). Liquidity management standards in layer 2 solutions.