Shalini Nagarajan

A security flaw was detected in the Libbitcoin Explorer on Thursday.



The Libbitcoin Bitcoin Explorer is a command-line utility for Bitcoin-related operations, such as key generation and transaction management, eliminating the need for a full node.&nbsp;



It allows developers and proficient users to engage with the Bitcoin network.



On-chain experts mentioned on X (previously Twitter) that many crypto wallets utilize Libbitcoin Explorer for generating private key entropy.&nbsp;



Now, hackers appear to have discreetly siphoned funds across various blockchains.



“If you generated a wallet using Libbitcoin&#8217;s Bitcoin Explorer, including as described in the appendix to Mastering Bitcoin, your funds are at risk (or already stolen),” bitcoin technical writer David Harding said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">If you generated a wallet using Libbitcoin&#39;s Bitcoin Explorer, including as described in the appendix to Mastering Bitcoin, your funds are at risk (or already stolen). Full details: <a href="https://t.co/Crlw63lUr4">https://t.co/Crlw63lUr4</a>&mdash; David A. Harding (@hrdng) <a href="https://twitter.com/hrdng/status/1689022029142560771?ref_src=twsrc%5Etfw">August 8, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Meanwhile, a crypto researcher from Johns Hopkins, Matthew Green, <a href="https://twitter.com/matthew_d_green/status/1689047993100410880">stated</a> that one should assume every crypto wallet has an entropy flaw.



Researchers Anton Livaja and Ryan Haywood, among others, on Wednesday <a href="https://milksad.info/index.html">highlighted the harm caused by a Libbitcoin vulnerability</a>, noting that malicious individuals found and exploited the flaw to siphon money from impacted wallets.



The researchers pointed out that &#8220;Mastering Bitcoin,&#8221; a guide for developers to understand bitcoin, suggests using a command called &#8220;bx seed&#8221; for wallet generation.&nbsp;



This command is used in the Libbitcoin Explorer to generate random numbers for Bitcoin wallet creation and is essential for ensuring wallet security.



But if the tool relies on a frail random number generator, wallet security could plummet from robust standards like 256-bit down to a mere 32-bit, the team said.



If an attacker matches a wallet, they can access its funds and transaction history, regardless of whether the wallet is securely kept offline. The team believes that wallets created with this tool have been compromised and emptied.



The Libbitcoin team <a href="https://twitter.com/n1ckler/status/1689026658408259585?s=20">disputes</a> the findings.



According to the researchers’ findings, the primary theft took place around July 12, 2023, but initial breaches likely started on a smaller scale in May 2023.



Another related vulnerability in different wallet software was identified in November 2022 and quickly exploited, possibly setting the stage for this recent incident.



Github activity for libbitcoin halted around the time the first suspected bug exploit occurred on the mainnet, according to <a href="https://twitter.com/niftynei/status/1689435739409248256">one developer</a> with a substantial following.



The team hasn’t determined who is responsible for the continuous thefts from compromised wallets.



A list of wallets potentially affected by the vulnerability was not immediately available, however <a href="https://twitter.com/tayvano_/status/1689599497616388096">according to</a> MataMask&#8217;s Taylor Monahan, popular wallets such as <a href="https://blockworks.co/tag/metamask">MetaMask</a>, <a href="https://blockworks.co/tag/ledger">Ledger </a>and <a href="https://blockworks.co/tag/trezor">Trezor</a> are not affected.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Researchers flag security concern for users of certain crypto wallets

Sebastian Sinclair

Leading multi-party computation wallet providers, including Coinbase, Binance and ZenGo, have patched critical vulnerabilities discovered in widely used cryptographic protocols, potentially affecting millions of users.



Dubbed BitForge, the vulnerabilities identified and unveiled by the Fireblocks Cryptography Research Team on Wednesday could have allowed attackers to steal private keys from users&#8217; wallets.



The disclosed vulnerabilities “effectively downgrade the protection offered by the MPC system to that of a conventional single key system,” Idan Ofrat, co-founder and chief product officer at Fireblocks told Blockworks.



GG-18 and GG-20 protocols were found to be vulnerable at the pseudocode level — the inherent design or logic of the protocols — enabling attackers to exploit the flaw by exfiltrating the full private key, a <a href="https://blockworks.co/tag/fireblocks">Fireblocks</a> spokesperson said.



In simpler terms, it&#8217;s like having a flaw in the blueprint of a building. Even if you build the structure perfectly according to the blueprint, the flaw is inherent in the design itself.



“BitForge only impacts MPC wallet providers that utilize the GG-18, GG-20, and Lindell17 protocols,” the spokesperson said. “Even if another provider is using a different MPC [multi-party computation] protocol, it is important to ensure they undergo regular code audits and have the cryptography resources to immediately patch security vulnerabilities.”



Some implementations required just 16 signatures for key extraction, while others could have necessitated as many as 1 billion. The Lindell17 vulnerability, on the other hand, emerged from wallet providers deviating from the protocol&#8217;s academic paper, which has since been updated.&nbsp;



The vulnerability created a backdoor for attackers to expose part of the private key when signing fails, Fireblocks said. In 2020, the GG protocols were updated to patch an earlier vulnerability, but these modifications inadvertently created additional flaws.&nbsp;



Fireblocks is advising all providers implementing these protocols to include required zero-knowledge proofs to enhance security. Users can check their exposure status through the BitForge Status Tracker.



While major players like Coinbase have resolved the vulnerabilities, the risk to smaller providers underscores the need to consult security experts to stay a step ahead, Fireblocks co-founder and CTO Pavel Berengoltz said.



“In cybersecurity, It is a common protocol for security researchers to provide information about a vulnerability they discovered to affected vendors privately and give the vendors 90 days to fix the vulnerability prior to disclosing it to the general public,” Ofrat said. “This allows the vendor ample time to mitigate the vulnerability while also making sure that security issues are eventually published for the public good to advance the entire ecosystem forward.”



Fireblocks identified 16 affected providers and open-source libraries but refrained from publicly naming the companies, emphasizing industry collaboration and providing a chance for fixes.&nbsp;



&#8220;As GG-18, GG-20, and Lindell17 are some of the most popular MPC protocols used by wallet providers, we wanted to provide users with the ability to find out whether they are currently impacted by BitForge,&#8221; the spokesperson said.



Ofrat recommends that wallet users check with their providers or consult Fireblocks’ <a href="http://www.fireblocks.com/BitForge">BitForge Status Tracker</a> to see if their wallet may be affected.



James Cirrone contributed reporting.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Crypto wallets patch zero-day vulnerabilities to safeguard user funds

Curve Finance is offering a bounty of $1.85 million to anyone who can assist in identifying the person responsible for exploiting their protocol, in a manner that could culminate in a lawful conviction in court.



“If the exploiter chooses to return the funds in full, we will not pursue this further,” the team behind the DeFi protocol said on Aug. 6.



On July 30, the DeFI protocol <a href="https://blockworks.co/news/curve-suffers-exploit">fell victim to a software bug</a>, resulting in the loss of more than $70 million in various digital assets.



One or more attackers took advantage of vulnerable versions of a programming language known as Vyper, using them to perform <a href="https://blockworks.co/news/attack-defi-bug-curve">re-entrancy attacks</a> on select Curve liquidity pools.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The deadline for the CRV/ETH exploiter passes<a href="https://t.co/VphQ0bfYr2">https://t.co/VphQ0bfYr2</a> <a href="https://t.co/x8LP9Tx4rs">pic.twitter.com/x8LP9Tx4rs</a>&mdash; Curve Finance (@CurveFinance) <a href="https://twitter.com/CurveFinance/status/1688221472815284224?ref_src=twsrc%5Etfw">August 6, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Curve is seen as the most structurally significant decentralized exchange in the DeFi landscape, with liquidity of $3 billion. Its importance particularly resonates in the stablecoin swap markets — an area that remained unaffected during these incidents.



On Aug. 3, Curve and other protocols impacted by the breach <a href="https://etherscan.io/tx/0xc45e47f6e7d3e74763032e2fb991fa9a003d8ed55c13c93c6a5368ff322d7742" target="_blank" rel="noreferrer noopener">proposed</a> a 10% bug bounty to the infiltrator, amounting to over $6 million. 



Some of the misappropriated assets were subsequently returned to <a href="https://twitter.com/AlchemixFi/status/1687921557417377793" target="_blank" rel="noreferrer noopener">Alchemix</a> and <a href="https://twitter.com/JPEGd_69/status/1687594063527038976" target="_blank" rel="noreferrer noopener">JPEGd</a>, but not the other impacted pools.



According to <a href="https://twitter.com/PeckShieldAlert/status/1688404426825117697" target="_blank" rel="noreferrer noopener">PeckShield</a>, 73% of stolen funds (worth about $52.3 million) have been returned as of Monday.



Following the incident, the attacker issued an <a href="https://etherscan.io/tx/0x23c4799784c91023204bd68a94ec7a963486f2485dc43c13d8b804d5301b8041" target="_blank" rel="noreferrer noopener">on-chain message</a>, maintaining that their decision to return the stolen assets was motivated by a desire not to inflict additional damage on the involved projects.



“I saw some ridiculous views, so i want to clarify that I&#8217;m refunding you not because you can find me, it&#8217;s because I don&#8217;t want to ruin your project, maybe it&#8217;s a lot of money for a lot of people, but not for me, I&#8217;m smarter than all of you,” the exploiter wrote in an on-chain message.



Curve’s <a href="https://blockworks.co/price/crv" target="_blank" rel="noreferrer noopener">CRV</a> governance token is down over 6% in the last seven days, and was last trading at $0.61. Post the attack, it briefly plummeted below $0.50, amid fears that CRV collateral used on DeFi lending platforms <a href="https://blockworks.co/news/curve-egorov-exit-defi-positions">could be liquidated</a> en masse.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Curve Finance offers $1.85M reward to identify attacker

<div id="highlights-block_6311a9bd99762" class="highlights">
 <ul>
 <li>Georgia-based traders told Blockworks they could sell crypto on Coinbase for 100 times their value elsewhere</li>
 <li>They&#8217;ve since had their bank accounts blocked as well as associated Visa debit cards</li>
 </ul>
 
</div>



Coinbase is seeking to clawback funds from bank accounts after discovering swathes of traders in Georgia had cashed out crypto for 100 times the intended market rate.



Coinbase users across the European nation were able to exploit an erroneous foreign exchange rate on crypto pairs denominated in the Georgian Lari (GEL), according to one source familiar with the matter and several Georgian traders who spoke to Blockworks under condition of anonymity.



A snafu at a third party provider led to an outsized exchange rate due to a misplaced decimal point for up to seven hours. This allowed no more than 900 Georgia-based traders to sell various crypto for GEL, and, in some cases, net thousands of dollars more than should’ve been allowed.



“In late August, prices for cryptos denominated in Georgia’s national currency had been rated at GEL 290 instead of GEL 2.90. The missed decimal point had been due to a &#8216;third-party technical issue,'&#8221; a Coinbase spokesperson told Blockworks.



Some trades, which should’ve netted around $150, were executed on Coinbase for $15,000, with proceeds withdrawn to personal bank accounts, users told Blockworks.



The average salary in Georgia is around $4,200 per year, meaning certain Coinbase users profited more than three times their national average. Estimates from a Georgian trading community that Blockworks spoke to places losses for Coinbase between $14 million and $140 million, although Coinbase refuted that claim.



Shortly after withdrawing related funds from Coinbase, Georgians said they received notification from their financial institutions advising them their bank accounts and associated Visa debit cards had been frozen.



“Hello, we have marked your transactions with Coinbase as suspicious and we’re locking all your accounts and cards,” one bank’s blanket text message to customers reads. “Please be aware that Coinbase may request clawback of the funds. Sorry.&#8221;



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="630" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg" alt="" class="wp-image-29987" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=418 418w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=424 424w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=356 356w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/pasted-image-0-1024x630.jpeg?w=1104 1104w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Image shows trader sold five lots of 0.01 ETH ($15.25) for 4,272 GEL ($1,525) each on August 30</figcaption></figure>



At least two domestic banks are said to have been involved in the freezing of funds, though not at the direction of Coinbase, one source close to the matter said. One local bank declined to comment, citing Georgian privacy laws.



“A very small number of users (0.001% of our total users) were able to erroneously trade and withdraw a small non-material amount of funds,” a Coinbase spokesperson wrote to Blockworks in an email. “Upon detection, we fixed the issue and are taking action to retrieve the improperly withdrawn funds.”&nbsp;



<h3 class="wp-block-heading">Coinbase traders in Georgia profited in multiple ways</h3>



Coinbase, a publicly listed exchange incorporated in Delaware, reserves the right to clawback or reverse transactions found to have been paid out in error, according to its terms of service as laid out in its <a href="https://www.coinbase.com/legal/user_agreement/united_states" target="_blank" rel="noreferrer noopener">User Agreement</a>.&nbsp;



But funds unrelated to the trades have also been frozen, meaning traders have now found it impossible to buy groceries and pay rent with their non-crypto related income, they said.



Georgia, which borders on Russia to the north and Turkey to the south, is not currently featured on Coinbase’s <a href="https://www.coinbase.com/places" target="_blank" rel="noreferrer noopener">list of supported countries</a> which details how users can engage with their platform. Coinbase told Blockworks it would provide a full list of supported countries though, as of press time, it has not yet been received.



The <a href="https://cms.blockworks.co/lawmakers-probe-coinbase-binance-ftx-over-crypto-fraud/" target="_blank" rel="noreferrer noopener">crypto exchange,</a> one of the most-used in the world, also has three tiered levels of trading restrictions with level one the most restrictive for users. That only allows for a person to send and receive crypto to their Coinbase wallet once a phone number has been verified for Know-Your-Customer (KYC) purposes.



Level two access, meanwhile, allows users to purchase crypto only after they have supplied a valid photo ID, such as a passport or driver’s license. Level three lets users send and receive crypto on the blockchain and requires users to verify personal information including proof of address, per Coinbase’s <a href="https://help.coinbase.com/en/coinbase/managing-my-account/verify-my-identity/eu-verification-levels-faq" target="_blank" rel="noreferrer noopener">website</a>.



According to one of the traders Blockworks spoke to, fiat deposits are currently not allowed in Georgia, though transfers, sending and receiving crypto as well as fiat withdrawals are.&nbsp;



Traders explained that methods of profiting from the price bug ranged from arbitrage between exchanges — transferring crypto purchased on another platform before selling it via Coinbase for 100 times profit — to simply selling crypto bought on Coinbase and withdrawing it in fiat.



“[There were] multiple levels of failure from Coinbase,” one of the Georgian traders said. “They had no checks. Even worse, when they detected unusual activity, which they should have detected, they failed to act on it for over seven hours.”



David Canellis contributed reporting.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.