BISQ Donation Address Hack

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BISQ

This is an excellent example of why decentralization is not a simple “silver bullet” solution. Bisq presents an interface that can be complex and overwhelming for first-time users, the RAM-intensive software must be left running continuously in order to set up any limit orders, and the escrow system means that a trader must already have cryptocurrency, so it’s not suitable as the first ever on-ramp of a new cryptocurrency user. A software upgrade provided by the centralized software team through their centralized distribution network introduced a vulnerability which required the same team to issue a centralized warning to all users and then issue another centralized software upgrade. In order to make things right for the small group of otherwise helpless users who had more funds than they intended to trade sent to an untraceable stranger, the centralized software team is now running a centralized fundraiser to provide some funds from a centralized pot in order to assist the victims over time.

The country for this case study is not yet known.

About BISQ

“Decentralized exchange (DEX) Bisq rang the alarm bells last night after a hacker exploited a significant software flaw to steal more than $250,000 worth of cryptocurrency from users.” “Monero (XMR) valued at $230,000 and bitcoin (BTC) valued at $22,000 was taken in the thefts, per the report. Overall, the value of the stolen cryptocurrency exceeds $250,000.”

“The hacker set other users’ default fallback address, posing as a seller they would start a trade with a buyer and wait for the time limit to run out.” “Rather than going to the legitimate owner, the digital assets arrived with the attacker, along with the buyer's payment and security deposit too.” “About 24 hours ago, we discovered that an attacker was able to exploit a flaw in the Bisq trade protocol, targeting individual trades in order to steal trading capital. We are aware of approximately 3 BTC and 4000 XMR stolen from 7 different victims. This is the situation as we know it so far. The only market affected was the XMR/BTC market, and all affected trades occu[r]red over the past 12 days.” “Security has always been a top priority for Bisq, but this incident shows it wasn’t perfect. The project is evaluating several approaches to strengthening security reviews and practices even more, and will detail them soon.” “Bisq took action right away upon discovering the attack, and the trading flaw was rectified with the release of Bisq v1.3.0. The exchange has resumed trading on Wednesday.”

“Many users have since reported failed trades and disappearing funds after upgrading to the latest version, 1.3.1, which contains the hotfix.” “In most cases of an exchange hack, the attacker can be booted off the trading platform for good. Not so with Bisq. One of the DEX's associated developers told CoinDesk that although the flaw was fixed, there was nothing to prevent the attacker – whose identity cannot be known – from accessing and trading on the platform again.” Bisq said it planned to make good on the losses. "A proposal will soon be created in the Bisq DAO, Bisq’s funding mechanism, that will aim to repay the 7 victims from future trading revenues," Jain explained.

The country for this case study is not yet known.

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 - BISQ Donation Address Hack
Date	Event	Description
April 1st, 2020 12:01:38 AM	First Event	This is an expanded description of what happened and the impact. If multiple lines are necessary, add them here.

Total Amount Lost

The total amount lost is unknown.

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

It is unknown how much was recovered.

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?

Prevention Policies

This is an excellent example of why decentralization is not a simple “silver bullet” solution. Bisq presents an interface that can be complex and overwhelming for first-time users, the RAM-intensive software must be left running continuously in order to set up any limit orders, and the escrow system means that a trader must already have cryptocurrency, so it’s not suitable as the first ever on-ramp of a new cryptocurrency user. A software upgrade provided by the centralized software team through their centralized distribution network introduced a vulnerability which required the same team to issue a centralized warning to all users and then issue another centralized software upgrade. In order to make things right for the small group of otherwise helpless users who had more funds than they intended to trade sent to an untraceable stranger, the centralized software team is now running a centralized fundraiser to provide some funds from a centralized pot in order to assist the victims over time. Decentralized exchanges are a new technology that continue to develop over time.