Harmony Horizon Bridge Private Key Exploit

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Harmony's Horizon Bridge Homepage/Logo

The Horizon bridge is a cross-chain feature developed by Harmony to enable the transfer of assets between Harmony's network and other blockchains such as Ethereum, Binance Chain, and Bitcoin. Users can migrate assets from Ethereum or Binance Smart Chain to Harmony using the bridge, and the redeemed assets can be exchanged back at any time. In June 2022, the Horizon Ethereum Bridge suffered a malicious attack, resulting in the compromise of 11 transactions and the theft of approximately $100 million. The attack exposed vulnerabilities in the bridge's multisig wallet security, allowing the attackers to access and decrypt private keys. The incident highlights the ongoing challenges in securing cross-chain bridges and the need for robust security measures in the blockchain industry.

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

About Horizon Bridge

"The Horizon bridge is a cross-chain feature developed by Harmony to facilitate the transfer of assets between Harmony’s network and other blockchains such as Ethereum, Binance Chain and Bitcoin. The bridge aims to provide users with the benefits of both the layer-1 network’s security and the layer-2 network’s efficiency."

"The Bridge is used to migrate assets from one chain to another. If you have assets on Ethereum or Binance Smart Chain, you can use the bridge to move them to Harmony blockchain and get corresponding assets on Harmony. LayerZero also allows redemption of the exchanged assets back at any time."

"By dividing its blockchain into four parallel networks called shards, Harmony reduces latency and improves overall efficiency. The Horizon bridge is an essential component of this innovative solution, enabling users to move assets across chains without compromising security or decentralization."

Harmony is a "young startup" and "the owners of a Horizon bridge that enabled frictionless asset transfers from the Ethereum network to BSC.

The Reality

"It’s been just a few months since the massive Ronin Network bridge hack triggered by multiple private key thefts. The Horizon Bridge hack follows a similar pattern where two private keys were compromised and used to steal $100M worth of tokens. While the investigation is ongoing the target, attack vectors, and subsequent laundering smell a lot like North Korea. The sad part was that the Horizon’s threat model clearly failed when it assumed that 2 keys could never be compromised at the same time."

"An attack at Horizon was similar to the earlier hacks of the Ronin Network bridge and Wormhole. The details of the hack are still unknown, but the problem seems to relate to the “private key compromise,” as the bridge’s owners reported no critical errors in the smart contract code."

"The multisig wallet required just two signatures to initiate transactions, which potentially made it more vulnerable to attacks." " Experts point out the weakness of the “multisig” wallet that uses only two signatures to enable the transaction."

What Happened

"In late June, attackers linked to North Korean hacker group Lazarus exploited a vulnerability in Harmony's Horizon Bridge to steal over $100 million." "Horizon Bridge $100M hack."

Key Event Timeline - Harmony Horizon Bridge Private Key Exploit

Date	Event	Description
June 23rd, 2022 6:02:48 AM MDT	Exploit Transaction	One exploit transaction.
June 23rd, 2022 5:13:00 PM MDT	Initial Announcement Tweet
June 28th, 2022 10:57:00 PM MDT	Blockthreat Tweet	The Horizon Bridge attack is referenced in a tweet from blockchain analytics firm BlockThreat.
July 1st, 2022 2:28:12 AM MDT	Included In Top 17 List	The Horizon Bridge attack is included in a list of the top 17 smart contract attacks published by 4irelabs.
June 28th, 2022 4:26:00 AM MDT	NameCheap CEO Critical Comment	The NameCheap CEO uses the Horizon Bridge incident as evidence that multi-signature isn't always the answer to prevent smart contract breaches.

Technical Details

"At 5:30 AM PST, multiple transactions occurred that compromised the bridge with 11 transactions that extracted tokens stored in the bridge."

"On the day of the exploit, the attackers compromised two of the five multi-signature (multisig) addresses securing the bridge. The multisig wallet required just two signatures to initiate transactions, which potentially made it more vulnerable to attacks. The exact attack vector remains unknown, although some speculate that the private keys of the compromised addresses were stored as plaintext in hot wallets.

According to Harmony’s incident response team, the private keys had been stored and encrypted by Harmony, using both a passphrase and a key management service for double encryption. Additionally, no single machine had access to multiple unencrypted keys. However, the attacker managed to access and decrypt several of these keys, allowing them to gain access to the servers running these hot wallets to control the necessary addresses to pass any desired transactions."

Total Amount Lost

"The estimated value at the time of the attack was approximately $100 million USD."

"The hackers stole a total of about US$103.7 million worth of Ethereum and multiple tokens in 12 transactions."

$107.3M USD - 85,851 ETH?

The total amount lost has been estimated at $107,300,000 USD.

Immediate Reactions

"On Thursday, June 23, 2022, the Harmony Protocol team was notified of a malicious attack on our proprietary Horizon Ethereum Bridge."

Ultimate Outcome

Stolen Fund Laundering

"The attackers first consolidated the stolen funds into a primary consolidation address (0x0d0431..ded00). They then split the ERC-20 tokens and sent them to 2 new addresses, which converted these amounts to Ethereum. The attackers then sent 72,770.4 Ethereum back to the Exploiter’s main address from these 2 new addresses.

Next, the attackers sent the Ethereum to 5 new addresses in 5 transactions between June 27 and July 1, 2022."

Liability Disclaimer Notice Added

A notice was added to the website homepage disclaiming liability.

"The LayerZero-Harmony Bridge Interface (“Interface”) is an interface that facilitates use of a third-party cross-chain communication system (“Bridge”) that is designed to enable users to send messages between certain blockchains to enable the exchange of crypto assets between such blockchains. Your use of the Interface and the Bridge is entirely at your own risk.

The Interface and the Bridge are available on an “as is” basis without warranties of any kind, either express or implied, including, but not limited to, warranties of merchantability, title, fitness for a particular purpose and non-infringement.

You assume all risks associated with using the Interface and the Bridge, and digital assets and decentralized systems generally, including but not limited to, that: (a) digital assets are highly volatile; (b) using digital assets is inherently risky due to both features of such assets and the potential unauthorized acts of third parties; (c) you may not have ready access to assets; and (d) you may lose some or all of your tokens or other assets. You agree that you will have no recourse against anyone else for any losses due to the use of the Interface or the Bridge. For example, these losses may arise from or relate to: (i) incorrect information; (ii) software or network failures; (iii) corrupted cryptocurrency wallet files; (iv) unauthorized access; (v) errors, mistakes, or inaccuracies; or (vi) third-party activities.

The Interface and the Bridge do not collect any personal data, and your interaction with the Interface and the Bridge will solely be through your public digital wallet address. Any personal or other data that you may make available in connection with the Bridge may not be private or secure."

Inclusion In Lists

The incident was referenced from a BlockThreat tweet for week 25 of 2022. List by 4IRE.

Total Amount Recovered

The total amount recovered is unknown.

Ongoing Developments

TBD

Individual Prevention Policies

Avoid the use of smart contracts unless necessary. Minimize the level of exposure by removing or withdrawing assets whenever possible. Aim to choose smart contracts which have obtained third party security audits, preferably having been audited by at least three separate reputable firms. Pay attention to the audit reports, which smart contracts are covered, and whether the smart contract has been upgraded or modified since the report. Ensure that any administrative functions with the ability to remove funds from the smart contract are under the authority of a multi-signature wallet which is controlled by at least three separate and reputable entities.

Store the majority of funds offline. By offline, it means that the private key and/or seed phrase is exclusively held by you and not connected to any networked device. Examples of offline storage include paper wallets (seed phrase or key written down and deleted from all electronic media), hardware wallets, steel wallet devices, etc...

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

Platform Prevention Policies

All wallets, minting functions, and critical infrastructure should be implemented with a multi-signature requirement, with a recommended minimum of 3 signatures required. This means that making important changes or approving spending will require the keys held by at least 3 separate individuals within the organization to approve. The multi-signature should be implemented at the lowest layer possible, all key holders should have security training, and all key holders should be empowered and encouraged to exercise diligence.

All aspects of any platform should undergo a regular validation/inspection by experts. This validation should include a security audit of any smart contracts, reporting any risks to the backing (of any customer assets, ensuring treasuries or minting functions are properly secured under the control of a multi-signature wallet, and finding any inadequacies in the level of training or integrity of the team. The recommended interval is twice prior to launch or significant system upgrade, once after 3 months, and every 6 months thereafter. It is recommended that the third party performing the inspection not be repeated within a 14 month period.

Work with other industry platforms to set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

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

Regulatory Prevention Policies

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

Set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services within the country, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

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