The team behind the cross-chain protocol Allbridge says the project will continue operating despite the recent $1.65 million exploit, with its long-term strategy now shifting away from liquidity pool-based bridging.

Summary:

• Allbridge is redesigning its infrastructure after a $1.65 million exploit affected liquidity pools across multiple networks

• The team is evaluating compensation options while investigating the attack with blockchain analytics firms

• Co-founder Andrey Velikiy says the protocol is likely to abandon liquidity pools in future versions

Co-founder Andrey Velikiy said the attack reinforced concerns that liquidity pools have become attractive targets for sophisticated hackers. According to him, the project had already been developing a new bridge architecture that avoids pooled user funds, and the latest incident has accelerated that transition.

The exploit occurred on July 20 after an attacker reportedly used a flash loan on Solana to manipulate pricing in the protocol's USDC/USDT pool. Because Allbridge balances liquidity across networks, the losses spread beyond the initially affected pool before the bridge was suspended.

To restore operations, Allbridge has temporarily switched to infrastructure based on Circle's CCTP and LayerZero, allowing transfers to continue without reopening liquidity pools. Velikiy said rebuilding user confidence will take time and indicated the previous architecture is unlikely to return.

The protocol is also exploring ways to compensate affected users. Recovering the stolen assets remains the preferred outcome, although the team may also use future protocol revenue if recovery efforts fail.

Meanwhile, investigators from AMLBot, Global Ledger, and Crystal are tracing the stolen funds. According to Velikiy, part of the cryptocurrency passed through Railgun, while another portion is believed to have been moved into shielded Zcash pools, complicating recovery efforts.