Ethereum Layer 2 Taiko Halts Network After $1.7M Exploit, Token Falls 11%

Taiko, an Ethereum layer-2 network, has temporarily stopped block production after it suffered a bridge exploit. The hackers were reported to have stolen around $1.7 million in assets.

As a result, the Taiko token crashed sharply as traders reacted to the security breach. The token has now dropped by 15%, falling all the way from its open price of $0.929 to $0.07

The network’s team quickly responded by halting block production. They also urged users to withdraw funds from all bridges connected to the network while their investigations continue.

How the Taiko exploit happened

According to the team, the attacker was able to exploit its bridge verification system by simply creating fake withdrawal requests. These withdrawals looked legitimate even though no matching deposits existed on the network. This allowed the hacker to drain funds from the bridge and token vault without completing genuine transactions.

Security firm BlockSec shared that the attack may have been linked to a leaked signing key in Taiko’s proof-generation system. They added that the key may have been accidentally exposed on GitHub, which then allowed the attacker to generate fraudulent proofs that were accepted by the network.

Source: BlockSec via X

Another security firm, Blockaid, had highlighted the flaw in the bridge’s source-signal proof validation at the start of the exploit.

The network, in response, immediately stopped new block production. They also suspended withdrawals through their main bridge and asked centralized exchanges to pause TAIKO token deposits.

Lookonchain shared that the attacker moved nearly 2 million TAIKO tokens, worth about $189,000, to an exchange wallet. The hacker is also said to control 870 ETH, valued at $1.52 million.

Source: Lookonchain via X

Taiko moves to contain damage

Despite the attack, the network acted as fast as it could to limit further losses. The team identified the attacker’s wallet address and worked with exchanges to track and potentially freeze suspicious funds. 

Later on, they confirmed the issue had been contained, stating that withdrawals have been paused.

“The incident is now contained. We've paused the Bridge and the ERC20Vault and confirmed withdrawals through them are fully stopped,” the network said.

Interestingly, some network activity remained stable after the exploit. Data showed its DeFi TVL increased to $3.84 million while bridged TVL stayed close to $12.85 million. Weekly transactions were also maintained at about 324,630.

Crypto hacks continue to rise

The Taiko incident is the latest in the list of crypto security breaches this year. In June alone, Secret Network suffered a $4.67 million exploit, and then a liquidity pool on PancakeSwap lost almost $1.1 million. Other victims include Humanity Protocol, Raydium AMM, RetoSwap, and Aztec Connect.

Data shows that the second quarter of 2026 is now the most hacked period in crypto history. Around 70 separate attacks resulted in about $746 million in losses.

TRM Labs reports also estimated that unlawful cryptocurrency transactions reached about $158 billion in 2025, the highest level seen in the last five years. This highlights how security breaches have become much more common in the crypto industry.

Source: TRM Labs