Near Protocol Rainbow Bridge First Attack Mitigated

Notice: This page is a new case study and some aspects have not been fully researched. Some sections may be incomplete or reflect inaccuracies present in initial sources. Please check the References at the bottom for further information and perform your own additional assessment. Please feel free to contribute by adding any missing information or sources you come across. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Near Protocol

The Near Protocol Rainbow Bridge allows the transfer of tokens between the Ethereum, Near, and Aurora blockchain networks. Like most bridges, there is a possibility of attackers submitting fraudulent transactions trying to trick the bridge into releasing funds without making an actual payment. The Near Protocol Rainbow Bridge requires the attacker to send a "safe deposit", has watchdogs monitoring the network, and allows validators to flag and reject any suspicious transactions.

On the early morning between April 30th and May 1st (depending on timezone), a fraudulent transaction was submitted. It was successfully detected and mitigated in this case, and no funds were lost.

About Near Protocol

The NEAR Rainbow Bridge is a solution for scalability in blockchain networks, particularly for Ethereum. The ETH <> NEAR Rainbow Bridge enables seamless migration of assets from Ethereum to NEAR's low-cost and developer-friendly platform. Due to increased demand on the Ethereum network, users can now bridge their assets to NEAR and enjoy faster transactions without compromising speed.

The Rainbow Bridge is a trustless and permissionless protocol, enabling anyone to deploy, use, or maintain a bridge without requiring approval. It addresses the congestion and high gas fees associated with increased transactions. It allows cryptographic proof on NEAR to be usable in Ethereum contracts and vice versa, facilitating activities like voting with ETH balances in NEAR DAOs. The bridge is accessible through the ETH Faucet and MetaMask wallet, and transactions on NEAR confirm in 1-2 seconds at a low cost. While transferring assets from Ethereum to NEAR takes about six minutes and incurs an average cost of $10, sending assets back to Ethereum currently takes up to sixteen hours and costs around $60. However, these costs and speeds are expected to improve in the future. The Rainbow Bridge is available to everyone, offering advantages in speed and cost for transferring ERC-20 tokens on NEAR.

NEAR protocol, which uses blockchain sharding technology, serves as the foundation for the Rainbow Bridge. The protocol offers advantages such as Nightshade sharding, Rainbow Bridge, and Aurora, which enable efficient data processing, seamless token swapping between Ethereum and NEAR, and layer 2 scalability. The Rainbow Bridge is decentralized and permissionless, allowing for the transfer of ERC-20 tokens, stablecoins, wrapped tokens, and NFTs. It offers faster confirmation times and lower transaction costs, benefiting both developers and users.

Users can connect to the bridge using WalletConnect, MetaMask, or the Brave crypto wallet. If they don't have a NEAR account, they can create one by logging in with MetaMask and proving ownership of an Ethereum address with a balance of at least 0.05 ETH. The bridge allows popular tokens such as stablecoins (e.g., USDT, DAI), wrapped assets (e.g., WBTC, WETH), DEX tokens (e.g., UNI, 1INCH), lending tokens (e.g., AAVE, COMP), and service company tokens (e.g., HT, CRO) to be interoperable with NEAR. The transfer of ERC-20 tokens uses a two-step process of approval and transfer, with the tokens being locked in a token locker contract on Ethereum until they are unlocked on NEAR.

TBD more on architecture and GitHub. Team founding. Etc...

Statistics on the rainbow bridge are publicly available on the Dune website.

NEAR, a blockchain infrastructure, challenges the centralized cloud space by providing a community-operated, distributed node-powered cloud-computing infrastructure. This approach contrasts with centralized solutions prone to concentrated risks. NEAR's distributed ledger, in the event of a DDoS attack, lacks a central point of attack, enhancing stability.

The Reality

"Usually, it's Rainbow bridge relayers, who submit the info on NEAR blocks to Ethereum. However, sometimes others are doing this. Unfortunately, usually with bad intentions." "Such a mechanism protects the network from seeing potentially hundreds of millions of dollars in losses, especially as bridge attacks become more commonplace."

While the mechanism is designed to prevent malicious transactions, a potential concern was that the detection of malicious transactions may depend on human participation, which could be challenging at certain times of day.

What Happened

An attacker attempted to exploit the near bridge protocol.

Key Event Timeline - Near Protocol Rainbow Bridge First Attack Mitigated

Date	Event	Description
August 19th, 2020	The Rainbow Bridge Is Announced	An announcement describes the building of the Rainbow Bridge.
April 6th, 2021 6:05:20 AM MDT	The Rainbow Bridge Is Launched	The Rainbow Bridge launched is announced. TBD what's different between these two announcements?
April 6th, 2021 8:10:45 AM MDT	Rainbow Bridge Guide Published	The "Rainbow Bridge Guide (full version)" is published to YouTube.
April 30th, 2022 10:01:49 PM MDT	Attacker Brings Funds From TornadoCash	The attacker brings some funds from TornadoCash. He wants to make sure his donation is anonymous.
April 30th, 2022 10:07:35 PM MDT	Attack Smart Contract Prepared	The attacker wallet prepares a smart contract in preparation for their attack.
April 30th, 2022 10:10:47 PM MDT	Attacker Tries Hard To Donate ETH	The attacker first tries to donate his Ethereum but it fails because he "[c]an only replace with a sufficiently newer block".
April 30th, 2022 10:21:00 PM MDT	Attacker Generously Donates 5 ETH	The attacker finally succeeds in making his generous donation of 5 ETH to support the Rainbow Bridge.
April 30th, 2022 10:24:03 PM MDT	Transaction Reverted No Block Can Be Challenged	Two transactions. One transaction fails because "No block can be challenged at this time". The other is successful.
April 30th, 2022 10:27:35 PM MDT	Near Protocol Deployer Transaction	A transaction occurs from the Near protocol depoyer.
May 1st, 2022 11:01:00 AM MDT	Twitter Post About The Attack	Alex Shevchenko posts a summary with details of the unsuccessful attack and that the costs for attacking the protocol will also be increased.
May 2nd, 2022 12:19:00 AM MDT	Inquiry About HAPI Protocol	Twitter user Jake Prior posts to inquire about the role of the HAPI protocol in preventing the attack. This is not answered.
August 22nd, 2022 6:31:00 AM MDT	Report of Second Attack	The first attack is referenced in a report on the second attack attempt.
August 23rd, 2022 6:08:00 AM MDT	Referenced In CoinDesk Article	The first attack is referenced in a CoinDesk article on the second attack attempted on the protocol.

Technical Details

The attacker "got some ETH from Tornado to start the attack around [4 AM UTC]." "With th[is] money he deployed a contract that meant to deposit some funds to become a valid Rainbow Bridge relayer and send the fabricated light client blocks." "He was trying to hit the moment to front run our relayer, but failed to do it."

"After it, he decided to send the similar transaction with the block timestamp in the future (+5h)[. T]his transaction successfully substituted the previously submitted block." "Probably, the combination of the high Ethereum fees (and a delay of the block relaying) and a desire to check whether watchdogs are operational or not, were stimulating an attacker to break the bridge in that exact moment."

"For at least 6 months we knew that watchdog transaction would be front run by the MEV bots (reported by our auditors @sigp_io). [The m]ain reason to keep this mechani[sm] is the additional protection: MEV bots know how to get transactions executed ASAP."

Role Of HAPI Protocol

HAPI, a cybersecurity layer, aims to prevent money laundering, hacking, and unauthorized transactions within the HAPI Protocol network. Its on-chain approach, embedding smart contracts, enables immediate notification and alerting, preventing adversarial attacks. The partnership between NEAR and HAPI focuses on expanding NEAR's ecosystem, securing the blockchain, and extending the DeFi space.

https://twitter.com/haenko21/status/1444303695966056451

Twitter user Jake Prior posts to inquire about the role of the HAPI protocol in preventing the attack. This is not answered.

https://twitter.com/MilkyGemHunter/status/1519779420470497280

https://twitter.com/veshorg/status/1444008053532209153

https://twitter.com/donamarahp/status/1453009850267578372

https://twitter.com/i_am_hapi_one/status/1581359568181137409

Total Amount Lost

No funds were lost, except by the attacker, who lost 2.5 ETH.

Immediate Reactions

"In a short period one of the bridge watchdogs figured out that the block submitted is not in the NEAR blockchain; created a challenge transaction and sent it to Ethereum." "Immediately, MEV bots detected this transaction and figured out that front-running it would result in 2.5 ETH gain, so they did exactly th[at]."

"As a result, [the] watchdog transaction failed[. The] MEV bot transaction succeeded and rolled back the fabricated block of the attacker. Some min[utes] after this, our relayer submitted a new block[.]" "The attack was mitigated fully automatically, Rainbow Bridge users even didn't saw anything happening, continuing transacting in both directions."

The "[a]ttacker lost 2.5 ETH, which was pa[i]d to the MEV bot because of the successful challenge."

"A bit later we started to investigate the strange behaviour and paused all the connectors. And once figured out the details, unpaused them back."

Ultimate Outcome

The Near protocol outlined some potential adjustments to their protocol based on the attack.

"We [plan to] redesign a bit the challenge payout mechanics, so the majority of the relayer stake is kept in the contract (so, lost to the attacker too), and some fixed amount payed to the watchdog (or MEV bot)." We also plan to "increase the stake for the relayer manyfold, so similar attempts would cost much more." "Money that attackers would loose will be spent for bug bounties and additional audits." "Every watchdog transaction, that would fail because of the front running will be rewarded with a portion of the attacker stake through the manual process. In case this happens, please send me a message." "I wish everyone who is innovating in the blockchain to pay enough attention to security and robustness of their products through all the available means: automatic systems, notifications, bug bounties, internal and external audits."

Ultimately an exploit on the near protocol was again attempted in August.

Total Amount Recovered

No funds were lost, except by the attacker. The attacker did not recover their funds, and funds were instead donated to the treasury.

Ongoing Developments

There are no remaining developments to be concluded.

Individual Prevention Policies

This case does not appear to have resulted in a loss to any individual.

The only entity losing funds in this case was the attacker, who by all accounts appears to have been attempting to defraud the protocol.

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

Platform Prevention Policies

This case does not appear to have resulted in a loss to any platform.

This system seems to have worked effectively due to the multi-signature nature of having multiple independent validators to approve the transactions. Such a system likely works well to automatically approve small value transactions, where there is minimal incentive to attack, with continual adaptation and a small treasury to pay out any losses available. Larger transactions would likely benefit from human oversight as it can be challenging to be sure that the automated systems will effectively detect the full diversity of potential fraudulent transactions. There is a tendency for all nodes to employ similar software that will make the exact same decision, thereby negating key benefits of the multi-signature setup.

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

Regulatory Prevention Policies

It does not appear that any funds were lost in this case.

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