AI Escaped the Sandbox. Crypto Is the Next Target

It’s been a crazy week in the AI space because we’ve seen OpenAI’s latest model attack another platform, get out of its sandbox environment where it shouldn’t have been able to just to solve a problem and attack another platform to try and find answers to that problem. Now, this is crazy because a lot of the methods that that AI model used is what is being used to attack the crypto protocols, bridges and validators out there at the moment. So this could very well have a massive impact to the crypto industry. And I think it’s being downplayed and underestimated at the moment.

So if you haven’t caught up to the latest news, this is a bit of a summary here. This platform called Hugging Face got attacked by OpenAI’s latest model, which was placed into a sandbox environment, which it shouldn’t have been able to get out of. But it slowly went through, found a weakness, a vulnerability, got out one way, and then continuously found more and more different ways to get out of its environment. Once it did, it tried to find another platform where it could possibly find the answers to its problem that was trying to solve and thought Hugging Face was a perfect place where it could possibly find those answers.

So then it breached Hugging Face’s platform using weak passwords or leaked passwords that it found online and then continuously started to probe deeper and deeper until it got into Hugging Face’s infrastructure. So that’s the situation there. And considering that AI just continuously works in the background, looking for multiple different vectors of attack to get into another platform is insane and crazy. And of course, these platforms have lots of resources and funding to protect themselves against these type of attacks, but they still get attacked and probed.

So where does that lead us in regards to the crypto space? And this is where things get really crazy. And this article here from Coindesk points out a couple of things that we should be aware of. So let me just read out these points here.

Much of the crypto attacks happen before the funds move. Attackers scan code, test passwords, search for exposed credentials, analyse signing setups, and look for a path into administrator accounts. That’s even Discord environments and anything that you use to communicate with your crypto community. They’re all possible attack vectors.

So it’s really important that all these projects take security to the utmost and bring on board a moderator or something that could expose the entire project. So there’s a lot of things that we need to look into here. Now, the weak point may not be a smart contract. It may be a developer’s laptop, a poisoned software package, or a bridge validator.

So there’s multiple different ways to get into a particular platform, and the smart contracts aren’t always the point. If we have a look here on some previous attacks, Drift for $285 million, that was a six-month social engineering campaign to get into the credentials and gain privilege access. This other one here, KelpDAO for $292 million was a bridge loss, and it attacked a single verifier floor within their system. And the list goes on and on.

And I really do think, if you have a look at this headline here, that the artificial intelligence threat to crypto is definitely being underestimated. I’ll put links to all these articles in the show notes down below. And while I’ve got your attention, don’t forget to hit that thumbs up, like, subscribe, notification bell. My name is Peter, and I keep you guys up to date with everything that’s happening in the crypto space.

So if we go back to here and have a look at what’s happening in the Cardano space at the moment, this latest Wanchain bridge could have very well been another exploit due to AI probing and looking for various attack vectors to gain access to the bridge’s assets. And this was very unfortunate to see, but this isn’t the only bridge hack that we saw this week, this week alone. Coin Bureau put out this. We got AFX Trade for $24.15 million.

We’ve got Verus for $7.55 million. We’ve got B2 Network for another $3.86 million. So the list goes on and on. And the unfortunate thing with Verus here is that they had a follow-up attack for another $7.53 million.

So this is an insane, insane amount of attacks that are happening at the moment. And we’re just seeing more and more of these ramp up. The problem with the bridges is that the way the bridge works is that people will bring in assets from one chain and then lock it into a smart contract on that chain itself. The assets are just sitting there.

They are a sitting target. So when an attacker comes along, they’ll be looking at those sitting targets and saying, that’s an easy place to exploit, because if I can get into one, I can get into a lot of the other assets that potentially are being locked up on that bridge. So bridges are and have always been a honeypot for attackers because of the amount of assets and liquidity that they hold within their ecosystems. So a lot of these bridges, they’re built very well.

They’ve had multiple security audits and whatnot, but somehow they’re still being attacked by these. But somehow they’re still being attacked. And I really do think that AI is playing a deep role at the moment to find these vulnerabilities and attack these bridges. Now, back to the Wanchain exploit that happened earlier this week.

Now, a lot of you that watch my channel are in the Cardano ecosystem, so you’re pretty interested in the details around this one here. But this one here was a 10 million US dollar exploit that looked into the smart contract and how the signing message was done. So the smart contract checked a signed message by dropping 14 variable length data fields into one continuous byte string. They didn’t include the delimiters or length prefixes between the values.

So essentially, the hacker or even AI model found a way to check for that signed message. So the signed message is when something is sent to the platform. You need a signature to verify that this is correct and this should be done. And it found a way to capture that from one transaction and then reuse that again for a different transaction.

So the signing message here didn’t include any delimiters or length prefixes between its values. It should have been split up into little chunks, but it didn’t in this case. And because it didn’t, it ended up with the same hash message at the end, the same size. So it treated it as being valid.

So when they managed to legitimately sign an authorization of three thousand one hundred and ten NIGHT tokens by sliding the field boundaries around, they reused that identical signature to extract two hundred and three million NIGHT tokens instead. So one signature that they used in a previous transaction could be reused to extract even more NIGHT tokens. So that’s how they did it. So that’s a sixty five thousand X inflation by just mashing the values together.

So absolutely crazy what happened here and really, really unfortunate. Some of you out there I know took advantage of the situation and snapped up a lot of NIGHT tokens at an extremely low price. So if you did that, I’m happy for you. I didn’t want to take that type of risk.

There is still a lot of NIGHT tokens yet to be dumped as well. But it looks like the mitigation of this has been good. And a lot of the addresses that the hacker is trying to exit out of have been blocked. So it may not be able to execute on a lot of these trades, which is kind of a good thing for the NIGHT, Midnight ecosystem and the Cardano ecosystem.

Now, the attacks don’t just stop there on the Wanchain bridge. Like I said, this is continuously happening. And this one here at the Rosen Bridge. So Rosen Bridge, for those that don’t know, they bridge Bitcoin over to the Cardano ecosystem.

So they have rsBTC moving back and forth between Bitcoin and Cardano. And what they noticed was a continuous attack attempts to try also to forge signed signatures on their platform. But so far, absolutely nothing has gotten through. 84 attack attempts so far and still nothing is getting through.

So that is really good testament to see how strong the Rosen Bridge is at the moment in regards to their liquidity being brought back and forth between Cardano and Bitcoin. But bridges, bridges, scary, scary stuff. Mike Hornan put up this post and I just want to read it out for you guys. So you’re aware of what’s happening.

Guys, this one matters. This isn’t a joke. Since January, we process more than 186 vulnerability reports and more than 30 of them turned out to be legitimate vulnerabilities that required intervention and fixes. That’s on top of everything else that has been happening behind the scenes to keep this blockchain secure, most of which I can’t really talk about.

And that’s just the security side of what Intersect have been doing. This work isn’t optional. It’s essential and it has to be done if we want Cardano to remain secure and resilient. If you believe this work is worth continuing, please consider voting yes.

Now, this is all in regards to the Intersect proposals at the moment to withdraw funds to actually do this type of work. And from what I’ve heard from other people working in this space, I’ve been talking about Claude Mythos and Fable with other developers and finding out what they’re doing or if they got access to Mythos so they can actually secure their applications and stuff. And it sounds like some people have really high level access to be able to sort this stuff out for the Cardano ecosystem. But of course, they can’t talk about any of this because if any of it got out, other AI models could jump in and potentially attack the chain, etc., etc.

And it’s not just Cardano, it’s Ethereum, it’s Bitcoin, it’s all the other major chains out there that also have potential access to these latest frontier models to be able to audit their chains. Now, I’ve tried to audit my own stuff with Fable and there are guardrails in place blocking me from doing so. So you have to do things in a really roundabout way to try and find vulnerabilities. And even last week, there was one found for my CardanoPress plugin, which is kind of was legitimate, but it took a lot of work to actually get that vulnerability to happen.

But we still patched that one anyway, just in case something was happening. But this brought up a very interesting conversation between various developers and people within the ecosystem. And I just want to point out this comment here that Phil put up on this conversation thread. Unfortunately, if you aren’t on their list, many massive open source repositories without the right connections or even stars, you don’t get the benefits of this and are left to fend off the sharks yourself.

He’s referring to being able to access the latest frontier models to be able to protect yourself from these attacks. It’s imperative that we attempt to get Cardano core repos and critical infra into these programs. Also, with respect to security by obfuscation, indeed, keeping security findings and patches private is certainly the matter. But that isn’t to say being closed source, private closed source provides a tangible benefit.

LLMs basically make closed source security entirely irrelevant. They can perform perfect high level abstraction, decompilation or even more obfuscated executables. What’s more important is the process for responsible disclosure of most large open source repos to support private issues for security reports. It’s imperative that we attempt to get Cardano core repos and critical infra into these programs.

And I completely agree, because if we can, then we get access to the latest LLMs, large language models, and we can use them to protect Cardano against these future potential attacks. So definitely something that we do need access to. And hopefully the teams are working in regards to all of those levels of access. Now, with all of these attacks out there, what can you do next?

What should you be doing or what are your options at least that you can think about to help protect your crypto assets? So if you have any of your assets within your cold wallet or whatever it is, maybe you should start thinking about diversifying and de-risking a single point of failure. For example, a lot of people that invest their money into crypto may also be diversifying their investments into different investment classes, such as index funds, 401ks, superannuation here in Australia, that’s what we call it, or even into property and other assets. So we have lots of different ways that we can diversify our investment of our money.

And you do that to de-risk yourself so you’re not exposed to one single point of failure within the market. If you have all your money in the property market, during the GFC, you would have lost a lot of money. If you have all your assets now in AI and the AI bubble pops, you could also lose a lot of money. So taking that kind of strategy and that thought pattern into your crypto storage holdings could be a very good tactic that you could use to de-risk yourself from being exposed for one single point of failure.

Maybe a hardware wallet provider gets hacked in the future, or maybe that particular hardware wallet provider has all your details leaked online and you become a target of a wrench attack. All of these things could happen and actually are happening around the world. So large crypto holders are exposed and get kidnapped in a particular country where they are. This happens, this is a very, very common thing.

So if you had your assets diversified across multiple different ways of storing your assets, such as a custody service, one particular cold wallet, another cold wallet, paper wallet, a hot wallet, there’s lots of different ways that you can store your assets and diversifying that and spreading things out and making sure that they’re all secure is one way to ensure that your assets aren’t lost in one single point of failure. So it’s a scary world out there, guys. I know. But have a look into how you could possibly store your crypto assets in multiple different ways, multiple different hardware devices, offline, off the hot wallet environments and off exchanges as well, or even partially on different types of exchanges, multiple different exchanges, so that you’re not exposed to one major failure and collapse.

Anyway, guys, I’ve got some more information coming up about the SecondFi attack. They’ve put up information about how this attack potentially happened with a investigation from Groom Lake. So I will put that up in a follow up video. Make sure you follow in the top right hand corner there.

You can get to the video link there. Learn more about what is happening to SecondFi and what you can potentially do next. Anyway, guys, that’s all I have for this particular video update. If you got something out of it, make sure you hit that thumbs up, like, subscribe, notification bell, YouTube memberships down below, buy me a coffee links there as well.

Great way to support the channel. If you can’t do any of that, just hit the thumbs up and I’ll see you guys. Well, stay positive and I’ll see you guys in the next video.