The Disappearance of $900,000 Draws Focus to Vintage Bitcoin Project Libbitcoin
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Information security firm Distrust says at least $900,000 has been stolen across multiple blockchains.
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Hackers were able to exploit a vulnerability in Libbitcoin Explorer, an open-source command-line tool or text interface used by Bitcoin developers to create cryptographic keys and communicate with the blockchain.
In 2011, just two years after Bitcoin’s launch, Anglo-Iranian anarchist developer Amir Taakia and a group of open source programmers created an alternative to Bitcoin Core - the original and still most popular way to connect to it the bitcoin network.
This alternative software, branded Libbitcoin, has now evolved into a comprehensive suite of tools – a library – for essential functions such as communicating with the Bitcoin blockchain and generating cryptographic keys.
It was even mentioned in the popular and arguably canonical book Mastering Bitcoin by Bitcoin educator Andreas Antonopoulos.
This is how the latest saga unfolded, according to a report on milksad.info, which details the findings of Distrust, the security company that discovered the vulnerability in July, aided by a group of independent contributors.
Sometime in May, hackers began stealthily stealing funds from unsuspecting users after discovering an obscure vulnerability in a series of wallets generated by the Libbitcoin explorer called BX.
The vulnerability was named “Milk Sad” because “Milk” and “sad” were the first two words in a wallet recovery seed phrase generated by the vulnerability, the report states.
The most significant theft — 29.65 bitcoin (BTC), worth about $870,000 at current rates — took place on July 12. According to Distrust, a total of at least $900,000 was stolen across multiple blockchains, including from some of the approximately 2,600 bitcoin wallets affected by the vulnerability.
Hardware wallets like Trezor and Ledger appear to be unharmed, but there are still a number of wallets that are at risk and the full extent of the stolen funds “is yet to be determined,” according to a tweet from Anton from August 8 Livaja, a member of the Distrust team.
BX comes with a text command called “bx seed” that uses the clock on a developer’s computer to create a seed phrase to create a wallet.
Crypto software provides random combinations of 12 to 24 words or seed phrases for users who wish to “recover” or regain access to their wallets in the event of accidental loss.
However, when using BX, it turns out that the resulting phrase is not sufficiently random. According to the report, “a decent gaming PC can do a brute-force search” or guess all possible word combinations for a user’s seed phrase “in less than a day.”
“Think of it like securing your online bank account with a password manager that generates a long, random password,” the report reads. “But often the same passwords are created for each user. Malicious people found out and pulled funds from every account they could find.”
Ethereum, Zcash, Solana, Dogecoin affected
Typically, seed phrases are created using a generator capable of generating a set or “key space” containing a dizzying number of unique word combinations represented by the exponent of a binary digit or “bit” – im Essentially the number two raised to the power of 128, 192, or 256.
BX has a paltry 32-bit key space that can only yield about 4.3 billion unique word combinations. “That’s not as many combinations as it sounds,” the report said.
Eric Voskuil, the main developer of BX, admitted that the seed generator was indeed insecure, but insisted that there was no bug in the software and argued that the BX seed text command had been abused. He tweeted a screenshot of the application’s GitHub documentation warning developers about the vulnerability.
“This is not a bug in BX or Libbitcoin,” Voskuil tweeted. “It’s reckless purse development.”
Several cryptographers in the bitcoin community disagreed.
“The case is crystal clear,” tweeted Tim Ruffing, cryptographer at bitcoin infrastructure company Blockstream. “It’s your bug, period.”
