$400 000 USD

FEBRUARY 2017

GLOBAL

ZCOIN/FIRO

DESCRIPTION OF EVENTS

"The idea behind Zcoin started way back in 2014 as a simple desire of a young but ambitious developer, to bring privacy and fair mining to a cryptocurrency. Back before privacy on blockchain was a serious topic, Poramin Insom was inspired after coming across the original Zerocoin paper while studying for his masters at John Hopkins University and sought to build a practical implementation of Zerocoin."

 

"The Zerocoin protocol was one of the first efforts at providing strong anonymity for Bitcoin. Despite not being implemented in the Bitcoin protocol, it was implemented as a stand-alone cryptocurrency in 2015: ZCoin." "[T]he Zerocoin protocol was a break-through contribution to the overall crypto-industry. It was one of the first solutions offering anonymity features to UTXO-based blockchains and paved the way for the growth of all privacy features on blockchain solutions."

 

"The Zerocoin protocol relies on an initial trusted set-up; i.e., it is required to trust someone to generate initial parameters and then destroy those parameters. For instance, ZCoin relied on RSA accumulators, which need the generation of two large prime numbers. Specifically, it relied on RSA-2048 parameters, generated from the RSA factoring challenge."

 

"To further fulfill its mission, today, Zcoin announced the launch of Crowdfunding System (ZCS) as a key step in decentralizing funding and decision making of the project. The new ZCS will serve as a transition from funding directly from the block reward to a donation model and shall begin funding ancillary tasks such as non-core development, third party integrations and community management and events."

 

"Zcoin (XZC), worth approximately $2 per unit, is an implementation of the Zerocoin protocol, which aims to provide fully anonymous currency transactions. Zerocoin has also been used to create a new protocol called Zerocash and the ZCash digital currency."

 

"On February 17, 20[17], Zcoin (now Firo) reported that a typo had let an attacker cash a profit of around $400,000 at that time." "A typographical error on a single additional character in code allowed an attacker to create Zerocoin spend transactions without a corresponding mint." "They managed to create roughly 370,000 coins and sold a majority of it for a profit of approximately 410 bitcoins ($435,000)."

 

"Yesterday, our team found a bug in our implementation of Zerocoin. A typographical error on a single additional character in code allowed an attacker to create Zerocoin spend transactions without a corresponding mint. We have identified the error and are pushing the fix urgently within the next 24 hours. We urge all pools and exchanges to update once the release is out."

 

"Ian Miers, one of the founders of ZCash, has provided a likely explanation for what went wrong. Miers believes it was probably a bug that resulted from copying and pasting code."

 

"The exploit happened due to the bug in the code and not from any weakness in the cryptography. The bug from the typo error allowed the attacker to reuse his existing valid proofs to generate additional Zerocoin spend transactions,"

 

"The still-unidentified attacker was able to steal around 370,000 Zcoins — around $680,000-worth (£546,000) at current exchange rates, according to CoinMarketCap. Almost all of these have already been sold on, netting the attacker a profit of around 410 bitcoin — $437,000 (£351,000) — according to Zcoin."

 

The attacker evaded detection for weeks by slowly making payments and withdrawals. "From what we can see, the attacker (or attackers) is very sophisticated and from our investigations, he (or she) did many things to camouflage his tracks through the generation of lots of exchange accounts and carefully spread out deposits and withdrawals over several weeks," Yap wrote.

 

"We estimate the attacker has created about 370,000 Zcoins which has been almost completely sold except for about 20,000+ Zcoin and absorbed on the market with a profit of around 410 BTC. In other words, the damage has already been mostly absorbed by the markets."

 

"Despite the severity of the hack, we will not be forfeiting or blacklisting any coins. Trading will resume once pools and exchanges have had time to update their code."

 

"Prior to this announcement we had disclosed the hack to the exchanges for them to assist in our investigations. We thank you for understanding and apologize for the silence today as we had to make sure we had all the relevant facts before making a statement on the same." "We urge all pools and exchanges to update once the release is out. Prior to this announcement we had disclosed the hack to the exchanges for them to assist in our investigations." "We would also like to thank everyone who has assisted on this matter and will be posting further details in a later post."

The initial version of ZCoin contained a bug which allowed for the minting of additional coins over time. This was exploited by an attacker, who was smart enough to mint coins very slowly over time, allowing him to convert them into bitcoin using another exchange. No funds were lost, however the value of ZCoin was reduced due to the increase in supply.

Sources And Further Reading

 For questions or enquiries, email info@quadrigainitiative.com.

Get Social

  • email
  • reddit
  • telegram
  • Twitter

© 2021 Quadriga Initiative. Your use of this site/service accepts the Terms of Use and Privacy Policy. This site is not associated with Ernst & Young, Miller Thompson, or the Official Committee of Affected Users. Hosted in Canada by HosterBox.