Frequent security incidents in 2019: EOS DAPP became the hardest hit, and $16 million was stolen from C-net

Introduction: When sorting out the security incidents that have occurred in the past two months, the author can't help but think of the early days of the Internet, which also went through a stage of frequent security incidents. Even now, security incidents in the Internet industry have not been completely eliminated. In fact, any new thing will have security risks. After 18 years of madness, blockchain has slowly returned to rationality, and various landing application products are slowly coming out. For emerging industries, experiencing security incidents is essential.

Therefore, Cheetah Blockchain Security will continue to review security incidents every month. While doing so, we will also experience growth together with everyone and the entire blockchain industry.

January 16, 2019 — ETH Constantinople upgrade postponed

Background

According to the plan, the Ethereum community was scheduled to conduct the Constantinople fork at block height 7,080,000, which was approximately January 16, 2019 in China. However, on the eve of the upgrade (January 15), ChainSecurity released potential issues related to the Constantinople upgrade. Out of caution, the Ethereum Foundation decided to postpone the fork.

Vulnerability type: Reentrancy vulnerability

Incident Process and Safety Analysis

• In order to better transition to the POS model in the future, the Ethereum Foundation decided to launch a transitional upgrade plan - Constantinople Upgrade. Because there is not much controversy within the Ethereum community, it will not lead to a hard fork, but a smooth transition to the next stage in the form of a soft fork.

• The Constantinople upgrade includes a series of improvement plans such as reducing miners' rewards. Among them, EIP 1283 will replace the original 1087 and adjust the net gas metering of the SSTORE opcode.

• While this seems like a developer-friendly solution, ChainSecurity has discovered a potential pitfall: an attacker can use updateSplit to set the current split, with the first address (the contract address) receiving all funds; and call the splitFunds function, which will perform a check* and use transfer to send all the funds in this pair of addresses to the contract; from the callback function, the attacker can update split again, this time allocating all funds to the attacker's second account; the execution of splitFunds continues, and all funds are also transferred to the second attacker account.

• u Due to the decrease in gas fees. Before the upgrade, each storage operation required at least 5000 gas. This is far more than the 2300 gas fee sent when calling a contract using transfer or send.

• After the upgrade, the attacker’s contract can successfully manipulate the variables of the vulnerable contract using a gas fee of 2300.

• In simple terms, an attacker could perform a DAO-level reentrancy attack after Ethereum is upgraded.

• Based on security considerations, Ethereum announced the postponement of the Constantinople upgrade plan at 12:00 a.m. Pacific Time after in-depth discussions.

Security Leopard's opinion

There is always a certain distance between reality and rationality. A few simple lines of code have slowed down the pace of Ethereum's upgrade. What difficulties will it encounter before fully switching to POS? When will excellent technologies such as sharding and lightning network be available? Before becoming the "world computer", Ethereum still has a long way to go.

January 6, 2019 — ETC was 51% attacked

Background

As a hard fork product of The Dao incident, it is the second largest forked chain in the world by market value. After the fork, ETC has been using the POW algorithm, but the computing power of the entire network has been at a relatively low level, which led to the ETC main network suffering a 51% double-spending attack on January 6.

Loss: Approximately $1.1 million

Attack type: 51% attack (double spend)

Incident Process and Safety Analysis

• On January 6, 2019, the security team warned the ETC team that ETC was at risk of a 51% attack. The next day, Coinbase officially confirmed that ETC had suffered 15 attacks in total, 12 of which involved double spending, with a total loss of 219,500 ETC (about $1.1 million). Coinbase also temporarily closed ETC transactions.

• Through analysis, it was found that the victims of this incident were mainly Biture and Gate.io exchanges.

• The security company then worked with Gate.io, Bitrue, and Binance exchanges to try to locate the attacker.

• On January 14, Gate.io stated that $100,000 worth of ETC had been returned.

Security Leopard's opinion

Essentially, there is no way to monitor a 51% attack in advance. To completely prevent a 51% attack, we can only find ways to increase the computing power of the entire network, or simply modify the consensus algorithm. From the perspective of a security company, we can comprehensively judge the possibility of a public chain being 51% at a certain point in time by calculating the cost of purchasing computing power and the tokens that may be obtained from the attack, and then referring to the current coin price. Although it is impossible to completely prevent a 51% attack, once a 51% attack occurs, we can increase the number of confirmed blocks for each transaction and suspend the deposit and withdrawal of this currency to minimize the loss.

February 2019 — EOS DAPPs were attacked in large numbers

Background

In January 2019, a series of guessing games on the EOS public chain were attacked by a new type of transaction blocking attack. The affected applications include popular DAPPs such as EOS.Win, FarmEOS, Shadow Dice, LuckBet, GameBet, EOSDice, and STACK DICE.

Scale of loss: About 20 cases, $5 million

Vulnerability type: blocking attack, etc.

Incident Process and Safety Analysis

• Different from the frequent contract-layer attacks such as random number or transaction rollback attacks in the past, this is an attack launched by exploiting the defects of the underlying public chain. After in-depth analysis, it was found that this is a fatal denial of service vulnerability in the main network layer. The attacker can launch a large number of junk delayed transactions to cause the EOS network super nodes (BP) to be unable to package other normal transactions, that is, to paralyze the EOS network by blocking the packaging of normal users' transactions.

• Since the vulnerability is essentially an underlying mainnet problem, any DApp game that relies on on-chain factors such as account balance or time to generate random numbers is likely to be attacked.

• This is also the reason why a large number of EOS DApps were attacked in January.

Security Leopard's opinion

EOS vulnerabilities frequently occur, many of which are caused by the lack of rigor of developers. According to the author's understanding, many DApps have only 1-2 programmers behind them, and even complete testers do not exist. In this case, the possibility of vulnerabilities is very high, and it is more likely to be attacked.

There are not many developers on EOS at present, and even fewer mature developers. However, for a public chain like EOS, this is a stage that must be experienced. Compared with last year, the number of Dapps and users on EOS has increased dramatically. Coupled with the efforts of security companies, the future prospects are still very bright.

January 14, 2019 — Cryptopia exchange hacked

Background

Cryptopia is a small exchange located in New Zealand, known as C-net in the circle. Its average daily trading volume is about 3 million US dollars, and more than 500 currencies are traded.

Loss: About $16 million

Vulnerability type: Private key leakage

Incident Process and Safety Analysis

• On January 15, 2019, local time, Cryptopia Exchange officially issued a notice that the exchange was attacked by hackers. Cryptopia Exchange will shut down the exchange service, fully cooperate with the police investigation and try to recover the stolen funds.

• According to public information, the stolen digital currencies are mainly ETH and various ERC-20 tokens on the Ethereum blockchain, with a total value of approximately US$16 million.

• According to Elementus’ analysis, Cryptopia was very slow to respond to the security breach. Hackers transferred 76,000 ETH from the wallet over a five-day period from January 13 to 17. The exchange did not respond and told users that the hacker had the private key and could withdraw funds from any Cryptopia wallet at will.

• Judging from various signs, the most likely reason is that C Network simply stored the private key on a server, and the hacker hacked into the server, making it impossible for C Network to obtain the private key from the server.

Security Leopard's opinion

It can be seen that the confusion and casualness of C.com in managing private keys led to the tragedy. This incident once again reminds exchanges and users to be respectful of private key management. Ensuring 100% safe protection of private keys is the most basic rule in the blockchain world.

In addition, as we all know, C.com is well-known in the industry for its many currencies. One of the reasons is that listing altcoins on C.com is very simple and crude, and only requires two steps: paying money (BTC) and voting. This has led to low trading volumes for most currencies on C.com, making it a paradise for arbitrageurs. The author believes that this model of listing currencies is very bad, and hereby recommends that exchanges of all sizes must have a process for security audits of projects before listing currencies. This is the most basic and responsible embodiment of user responsibility.

Other security incidents of the exchange:

• During the Spring Festival (February 14), it was revealed that the founder of QuadrigaCX, Canada's largest cryptocurrency trading platform, Cotten, died unexpectedly.

• On February 13, Coinbase exchange issued a bug bounty worth $30,000. From the amount, we can see that the vulnerability is a critical systemic vulnerability. This kind of bounty is very valuable to the industry, and it is recommended that each exchange and public chain should provide similar incentives to promote progress in the security field.

January 2019 – Ryuk ransomware is rampant

Background

U.S. cybersecurity firms tracked the notorious ransomware virus, called Ryuk, which spread across the internet by locking up computer files, demanding bitcoins from victims and creating incentives for participants to spread the virus.

<Example of Ryuk ransomware>

Loss: Approximately $3.7 million

Vulnerability type: Ransomware

Incident Process and Safety Analysis

• In the past 5 months, the GRIM SPIDER hacker group has received more than 705 BTC, equivalent to $3.7 million, through ransomware.

• The characteristic of ransomware is that once a computer is infected with the virus, all hard disk files will be encrypted and locked until the victim contacts the hacker and pays Bitcoin.

• During the New Year, some mainstream media in the United States were attacked, resulting in service suspension, including the Los Angeles Times, the San Diego Union-Tribune, the Wall Street Journal and the New York Times.

• This attack is different from the ransomware attack that occurred last year. The hackers mainly targeted corporate computers and calculated the ransom amount based on the value and size of the target organization.

• According to a report by CrowdStrike, the lowest ransom for this extortion attack is 1.7 BTC and the highest is 99 BTC. Currently, 37 BTC addresses have received 52 transactions. The GRIM SPIDER hacker group has illegally made a profit of 705.80 BTC, worth approximately US$3.7 million.

Summarize

At present, the number of security incidents in the industry has remained high. There are many reasons for this, such as the lack of unified technical standards and specifications in the blockchain industry, and each company has its own infrastructure; developers and users do not have enough security awareness, and both corporate teams and development teams need to strengthen training in this area; finally, there are too few security organizations and professional security talents in the industry. Faced with endless hacker attacks, more security talents are urgently needed.

In fact, based on the technical characteristics of blockchain, any developer needs to have a strong sense of security. Starting from the first code, they must be aware of the basic security issues that may be encountered, so that the project can reduce the cost of cognition.