ZCoin/Firo Typographical Error

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ZCoin/Firo

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.

This is a global/international case not involving a specific country.

About ZCoin/Firo

"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."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - ZCoin/Firo Typographical Error

Date	Event	Description
February 16th, 2017	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Total Amount Lost

The total amount lost has been estimated at $400,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.