The developers of privacy-centric cryptocurrency monero have patched a bug that would have allowed an attacker to cause significant damage to cryptocurrency exchanges and XMR-friendly merchants.
Addressed through a software patch privately distributed to exchanges and merchant and later publicly disclosed through a post-mortem on the project’s website, the bug would have allowed a user to deliberately “burn” XMR by sending multiple payments to the same stealth address. While the recipient would have been able to spend one output (the wallet automatically uses the largest output first), funds sent through subsequent transactions would have been rendered unspendable since these transactions would have resulted in duplicate key images that would would have been rejected by the network as suspected double spend attacks.
A determined attacker could have exploited this bug by sending a series of payments to a single stealth address belonging to a cryptocurrency exchange or merchant. Specifically, the bug was found in the monero wallet software, which did not screen for this particular abnormality. Consequently, the receiving wallet would not have flagged these transactions as problematic and would have credited the deposit or marked the invoice as paid.
In the case of an exploit executed against an exchange, the attacker would have been able to trade the full deposit for other cryptocurrencies and withdraw them to an external wallet. However, when the exchange operator attempted to include the deposited funds in a future transaction they would only have been able to spend the largest output. And though the attacker would not have received a direct material benefit, they could have — for the price of network transactions fees — been able to cause the exchange, and by extension traders holding funds on the platform, to lose a massive amount of funds.
If deployed on a large enough scale, the exploit could have indirectly benefited the attacker by reducing the effective monero supply, i.e. the amount of spendable XMR, thereby theoretically increasing the value of each spendable coin relative to the cryptocurrency’s market cap.
Notably, the basic structure of the exploit had been known for quite some time. However, it was only recently that, spurred by a discussion on the XMR subreddit, developers identified that the bug could be meaningfully exploited to the detriment of cryptocurrency exchanges, merchants, and other organizations.
Disclosure of the bug has not had a noticeable effect on the monero price. Currently trading at $114, XMR is down 3 percent for the day while most other large-cap altcoins are down at least 5 percent.
Reflecting on the process used to disclose the bug and privately circulate the patch to vulnerable organizations, community moderator dEBRUYNE acknowledged that the methods used were less than ideal but noted that the community has not yet implemented a better vulnerability reporting protocol.
From the post:
“I (and others) privately notified as many exchanges, services, and merchants as possible with the (private) patch that had to be applied on top of the v0.12.3.0 release branch. To reiterate (from the previous post mortem blog), this is clearly not the preferred method, as it (i) invariably excludes organizations that I (and others) personally do not have contact with, but are an essential part of the Monero ecosystem and (ii) may invoke a view of preferential treatment. However, there had only been limited time to improve the vulnerability report process.”
Later in the post, dEBRUYNE called for more developers to participate in XMR code review to prevent similar incidents from occurring in the future, adding that “this event is again an effective reminder that cryptocurrency and the corresponding software are still in its infancy and thus quite prone to (critical) bugs.”
Indeed, not even bitcoin is immune from such incidents. As CCN.com reported, BTC developers recently patched a vulnerability that, if exploited, would have allowed miners to effectively print new coins, artificially inflating the cryptocurrency’s supply.
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