Beanstalk Ethereum 182mmcsweeney: Despite many warnings from the community and security experts, a hacker has exploited Beanstalk’s system for an estimated $182 million in various crypto asset holdings. The attacker also obtained enough governance tokens to vote for every block maker.
Beanstalk is a credit-focused stablecoin protocol that was chosen as part of the launch of Ethereum’s mainnet. It uses cryptocurrencies such as Bitcoin and Ether to ensure stability against market price variations, which is important when you’re trying to facilitate consumer transactions on blockchain platforms.
The attacker was able to steal various crypto assets from a few addresses on the Beanstalk smart contract. The impact of this security breach has not yet been fully analyzed but according to estimates, it is likely that at least $182 million worth of different tokens were stolen.
Details of the hack and how it happened, were published by SpankChain and Kauri – the two teams responsible for managing the initial deployment of Beanstalk’s network and its governance systems.
The attack was performed using a complex mechanism and allowed the attacker to steal an unlimited number of governance tokens and control the entire network. The attacker also managed to manipulate transactions so they were invisible to other users while simultaneously enabling The DAO-style splitting of private keys.
The most vulnerable part of the system was the transfer transaction functionality. The hacker would receive a large transaction from various crypto wallets, store it in their own wallet, and then put a low fee on it before sending it back to the original address.
The platform’s “hot wallet” (an account used by the network for storing temporary funds) would then process the transaction. Since the value of this transaction was lower than the transaction fee, it was processed without any issues.
The hacker then went on to repeat this process with different transactions and wallets on Beanstalk’s network. The end result was that a huge number of transactions accumulated in the hot wallet, which could be used for instituting a takeover of the system through governance tokens.
The hacker was able to manipulate the votes on the platform by sending transactions through several different addresses, thereby giving them more influence in the voting system.
After successfully taking control of the network, he created multiple replacement blocks that split private keys and transferred ownership of all crypto assets. This effectively meant that all crypto assets were now controlled by him or her.
The attacker also acquired governance tokens that allowed them to vote for every block maker.
You can find more details about the hack in the slides below:
Kauri & SpankChain Response to Beanstalk Exploit – Oct 2018 from Kauri & SpankChain on Vimeo.
Beanstalk has already patched the vulnerability and all tokens have been returned to their original owners. Nevertheless, this hack is a harsh reminder of how dangerous open-source blockchain projects can be when they’re not managed properly or have weak security features.
The whole point of the protocol’s design is to enable users to transact with any kind of value on the platform, which is why it’s critical that it is properly protected from such malicious attacks.
Beanstalk functions as a decentralized exchange and anyone can become a block maker by buying governance tokens. However, no one should participate in the system if they don’t want to support it.