Hello and welcome. If you’re in crypto or DeFi long enough, you’ll eventually see the message no one wants: exploit underway. The teams that survive don’t wait for confirmation. They assume it’s real, switch to safe mode, and communicate with surgical discipline. That mindset is the difference between a contained incident and a cascading disaster. Here’s the twist: even as DeFi grows, total value stolen fell from about 3.8 billion dollars in 2022 to roughly 1.1 billion in 2023, according to Chainalysis. That’s progress. But when it’s your protocol—your tokens, your screen lighting up red—it still feels like freefall. After years around smart contracts and incident response, I’ve noticed survivors have one thing in common: they’ve rehearsed the first hour. Crisis choreography. Not just code. So what actually happens when a smart contract is exploited? Faster than you think. By the time you read the first panicked tweet, the attacker has usually executed the core sequence. - A vulnerability gets triggered: a logic bug, permissive auth check, oracle manipulation, approval misuse, or misconfigured proxy. Tiny cracks become open doors—sometimes dormant for weeks. Think Nomad’s bridge bug. - Funds get drained and obfuscated: swapped, bridged, mixed, laundered across chains. Every minute makes recovery harder. - Copycats swarm: if the path is reusable, others replicate it within minutes. It becomes a feeding frenzy—like Wormhole. - Protocol teams scramble: the best have emergency contracts, guardians, and a clear chain of command. They pause modules, upgrade proxies, restrict liquidity—every decision under pressure. - Community chatter explodes: phishing spins up almost immediately. Fake “refund” and “revoke” portals appear with the project’s brand. Every ten-minute delay in official comms correlates with real secondary losses. Time is money. Two things make the blast radius worse: - Integrations: one bug in a pool ripples into vaults, farms, routers, aggregators. Cream Finance learned this the hard way. - Communication latency: the longer you wait, the more likely someone clicks a malicious link. And here’s what most beginners miss. The immediate danger isn’t only “Was my wallet hacked?” It’s “Am I approving or interacting with a compromised system during the chaos?” Personal exposure comes from: - Standing approvals you forgot about. - Front-end compromises swapping legit contracts for malicious ones. (BadgerDAO’s front-end attack was a painful lesson.) - Panic transactions you sign in a rush. Professionals keep a cold storage firewall: never approve more than needed, separate wallets for storage versus spending, and regular allowance audits. Not paranoia—hygiene. Your first-hour playbook—beginner-friendly, no heroics: Step one: stop and breathe. Freeze activity. Don’t click links in chat. Don’t rush to bridge, claim, or revoke from a DM. Slow is smooth; smooth is fast. Step two: verify the signal. Go to official channels you’ve already bookmarked: the project’s verified X account, Discord announcements, and the known website. Cross-check with reputable security researchers or aggregators. If the site might be compromised, rely on known-good sources and, if possible, on-chain transactions from the protocol’s multisig or deployer. Look for a clear pinned message: what happened, what’s paused, what users should do—nothing more, nothing less. Step three: get off compromised surfaces. Close any dApps you have open. If a site asks for new permissions during an incident, that’s a red flag. Don’t connect your wallet to anything new. Stick to your wallet’s native interface. Step four: audit approvals for tokens at risk. Type tools manually into the browser: Etherscan’s token approval checker; Revoke dot cash is widely used. If you see unlimited approvals to affected contracts, set them to zero. Focus on high-value tokens first. Yes, you’ll pay gas. It’s a fire extinguisher. Step five: relocate assets if necessary. If you suspect approvals could be abused but tokens remain in your wallet, move them to a fresh address you control that has never interacted with the compromised contracts. Use your wallet’s native send function. Moving tokens won’t revoke old approvals, but it gets assets out of harm’s way. Step six: resist the refund trap. During the first hour, assume any “claim,” “refund,” or “emergency revoke” portal is fake unless the exact domain is confirmed across multiple official channels. If unsure, do nothing rather than something risky. Step seven: document your situation. Save transaction hashes, addresses, balances before and after. Take screenshots. If you file a claim, you’ll need clean records. Step eight: warn your circle. Post a calm, verified summary. No links, no drama—just facts and “don’t approve anything new.” After the initial shock, the next 24–48 hours are about controlled patience. Keep monitoring official updates. If the team pauses contracts or disables a module, you’ll see it on-chain. If they release a remediation or revocation tool, verify exact contract addresses they publish, not just the domain. Reputable teams often coordinate with known security auditors or platforms like Immunefi—look for those signals. If you lost funds, open a ticket through verified support and include your documentation. Never share seed phrases. If reimbursement is discussed, expect snapshots, timelines, and sometimes vesting—it takes time. In parallel, set wallet alerts. Add addresses to Etherscan watchlists or a trusted portfolio app so you get pings if something moves. When the dust settles, do a hygiene reset. If you interacted with a suspicious site, rotate to a fresh wallet for future use. Migrate assets methodically, starting with the most valuable. Clear your browser cache, remove unused wallet extensions, and re-download only from official stores. Update hardware wallet firmware. Review every standing approval—not just the exploited protocol. Now let’s build that cold storage firewall so the next incident is less scary: - Keep at least two wallets: a vault wallet (hardware, no unlimited approvals) and a daily driver for small approvals. - For minting or degening, use a burner—fund it only with what you’re willing to lose. - When a dApp asks for token approvals, set spending caps if supported. Don’t default to “unlimited.” - Make a monthly ritual: approval review day. Sort by unlimited or high-value tokens and prune aggressively. - Keep gas ready on a neutral account so you can always move assets. - Bookmark official URLs for the protocols you use. Don’t rely on search during a crisis—ads and lookalikes appear. - Subscribe to trusted security voices for early, high-confidence alerts. Train your scam radar. Legit teams rarely DM first. They never ask you to “verify your seed” or “import your wallet for a refund.” They won’t pressure you to act in minutes on a brand-new domain with a typo. If a message spikes your heart rate, step away from the keyboard. For builders, preparation is half the battle. Pre-authorize emergency guardians. Keep a well-tested pause switch. Use a battle-tested multisig with clear thresholds and backups. Draft first-hour communications in advance—templates for X, Discord, and a status page. Run drills. Know who decides what when seconds matter. Line up auditors and market makers who can help stabilize liquidity. Let me bring it back to you, the individual user. In a live exploit, your edge isn’t clever on-chain gymnastics. Your edge is discipline. Assume it’s real, go to safe mode, cut approvals using known-good tools, move assets you can safely move, and wait for verified guidance. Most secondary losses happen in the fog—fake sites, rushed signatures, blind trust. Don’t give attackers the chaos they’re counting on. If you do one thing today, set up your firewall. Split your wallets, bookmark official pages, and practice a five-minute approval revoke on a token you don’t mind touching. If you do a second thing, write your own first-hour checklist and keep it visible. In a crisis, we don’t rise to the occasion; we fall to the level of our training. Exploits are scary, but they don’t have to be catastrophic. The industry is getting better. With a little preparation and a calm first hour, you can turn a chaotic moment into a contained incident—and come out the other side in one piece. Stay safe out there, and I’ll talk to you soon.