Silo Finance Hack: Unchecked Inputs Open the Floodgates

Vulnerable Logic: How the Attack Unfolded

On June 25, 2025, Silo Finance—a DeFi lending platform—lost over $500,000 in ETH after an attacker exploited a validation oversight in its pre-release leverage contract. The targeted contract (LeverageUsingSiloFlashloanWithGeneralSwap) was designed to enable leveraged swaps, but it failed to properly check the integrity of the swapArgs input. This function, meant to trigger swaps, took user-supplied payloads and executed them without verifying their structure or intent.

The attacker crafted malicious swapArgs so that their own address received swapped funds, while a victim’s address that had approved maximum allowances was set as the borrower. Because of inadequate input checks, the protocol executed the borrow on behalf of the victim, draining the victim’s collateral and transferring funds straight to the attacker. The attack moved quickly, using flash loans and contract calls to cycle assets and avoid alerts. In total, 224 ETH was moved out, mainly via Tornado Cash and tied to two attack addresses.

Architectural Breakdowns and Protocol Evolution

This breach highlighted a recurring threat for all smart contracts: unvalidated user input is a leading cause of DeFi hacks. The contract’s input-handling routine did not verify the relationship between the receiver and borrower, nor did it impose sanity checks on transaction targets or data structures. The attacker was able to re-map internal call logic, bypassing intended permission checks and approval boundaries.

In response, Silo Finance overhauled its contract interface and validation architecture:

1. All user-facing functions now strictly validate every input for proper type, bounds, and mapping to protocol state.
2. Contracts enforce explicit allowlist verification for all addresses engaged in swaps, borrows, or contract interaction via payloads.
3. Critical state transitions require dual validation steps: a pre-execution simulation and an on-chain sanity check before performing swaps or borrows.
4. Privilege assignment and contract allowances are now scoped with rate and time-based circuit breakers—no new borrow or transfer can execute outside defined safety periods or allowance windows.
5. Automated monitoring flags anomalous usage patterns (such as rapid approvals or changes to function parameters from unfamiliar addresses) in real time, enforcing swift response and temporary contract pauses.
6. Formal audits and bug bounty programs specifically stress-test input validation routines, with an emphasis on user-controlled calldata, before any upgrade is released to mainnet.

The central lesson: even a single unchecked parameter can sink a protocol—especially for lending, leverage, and flash loan products. All contract inputs must be viewed as unreliable until proven and must pass through strict, transparent validation gates. Silo’s experience has already spread as a cautionary tale throughout the DeFi engineering community, proving that robust input validation is as essential as cryptographic soundness in all protocol layers.