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As usual on HN there are a lot of useless comments in this thread that are ill-informed dunks on cryptocurrency, but the real story of what happened is actually

by woah 5y ago

As usual on HN there are a lot of useless comments in this thread that are ill-informed dunks on cryptocurrency, but the real story of what happened is actually about the hazards of not using a blockchain. The system that was compromised was a "proof of authority" chain. These are different from proof of work or proof of stake chains that have hundreds or thousands of distinct validators. In a "proof of authority" chain, a usually small number of nodes, often run by closely associated entities have control over the chain. This is not a trustless system, and it does not have the same security and decentralization aspects that people usually associate with a blockchain. I would argue that it is not different than a trusted third party custodying the money. In this case, the system was especially egregiously abused in that 4 of the "validators" were actually controlled by the same entity. This then required the hacker to compromise only two systems to steal the money. The hacker is guilty of theft, but Axie Infinity, in my opinion, is guilty of falsely advertising their system as a blockchain.

vmception 5y ago
The consensus model of the database isn't relevant when the bridge contract itself was what signed off right? Isn't the issue that the keys were just for signing that transaction for that contract? Or did they really compromise 5 of 9 nodes for the entire blockchain? If it was this, it still doesn't suggest that was really necessary and only coincidence. It is just a fine to compromise funds on a centralized blockchain as long as you can get the funds over the bridge before the validators pay attention to block it, that's pretty common too. A flight to security.
- woah 5y ago
  It sounds like the component that was compromised was a bridge controlled by the same validators. I'm glossing over the different components of the system for simplicity.
iskander 5y ago
The security practice here is even worse than what you're describing, the company servers had been authorized to sign on behalf of the DAO, so only one compromise was required to get 5/9 validators.
- freeAgent 5y ago
  It was decentralization theater. When a single entity can control the network (or funds), making multiple keys all controlled by that same entity is pointless.
sk55 5y ago
100% this.
phphphphp 5y ago
Most cryptocurrency dunking is because of exactly what you describe: the technology, in its purest form, can avoid a certain category of problems... but those problems are rarely relevant and instead the "cryptocurrency" industry is just a bunch of people chanting the word "blockchain" over and over again as they code their way into a plate of spaghetti. Axie Infinity is one of the shining stars of the cryptocurrency world, it's the game that'll change the world for the better by bringing people out of poverty... oh, wait, no, it's just another shit show. Whether they got hacked in this way or not, whether they used a blockchain or not, it wouldn't change the fundamental reality that Axie Infinity is a garbage fire, and that's why people are well-informed when they are dunking on cryptocurrency, because even in its purest most magical well used form, it's literally a database. A database! The idea that Axie Infinity was great EXCEPT FOR the choice not to use a blockchain is so far from reality. I'd go as far as to say this hack is merciful and will finally bring an end to yet another bullshit, predatory project. The hacker has done the world a service, half-a-billion is a fair reward. (I don't want to distract from my point that this is all bullshit, but in these parentheses I'll add that your point doesn't follow, because the fact that they use a side chain with centralised validators is immaterial. The hack happened because private keys were stolen, which is just as much of a vulnerability if this happened entirely on the main ethereum chain where acquiring the various private keys required to create a legitimate multi-signature is just as possible. You're assuming if they had "just" used a blockchain they would have magically been smart enough not to keep keys lying around where they could be misused... the key takeaway here is that a technology that can be party to a half-a-billion loss because someone was dumb is not good technology)
- woah 5y ago
  > the fact that they use a side chain with centralised validators is immaterial. The hack happened because private keys were stolen, which is just as much of a vulnerability if this happened entirely on the main ethereum chain where acquiring the various private keys required to create a legitimate multi-signature is just as possible. No, you're wrong. The number of unique validators is at the heart of this hack, since these validators were also responsible for bridging money. If the chain had a decentralized validator set and the bridge used that same set, the hackers would have had to compromise 20-100 systems to execute the attack, which is very unlikely. I'm also genuinely curious: why do those who criticize blockchain most stridently on HN also know the least about it? It seems like there is an echo chamber of people who hate blockchain, refuse to learn anything about it, and yet talk about it a lot.
runeks 5y ago
> The system that was compromised was a "proof of authority" chain. These are different from proof of work or proof of stake chains that have hundreds or thousands of distinct validators. This is true. However, it should be mentioned that the difference between hacking a "proof of authority" chain and a "proof of stake" chain lies only in quantity: the number of private keys you have to compromise. Once a set of private keys owning a stake majority in a proof-of-chain have been compromised, that chain is no longer usable because the “evil” majority can create an infinite number of longest chains (starting from that point in time) using its stake majority, thus making it impossible to reach consensus on a chain in a decentralized manner. With proof-of-work, gaining a majority of hashing power only allows you to temporarily create one longest chain, which will be ignored once an honest majority regains sufficient hashing power.

by woah 5y ago

vmception 5y ago

The consensus model of the database isn't relevant when the bridge contract itself was what signed off right? Isn't the issue that the keys were just for signing that transaction for that contract? Or did they really compromise 5 of 9 nodes for the entire blockchain? If it was this, it still doesn't suggest that was really necessary and only coincidence. It is just a fine to compromise funds on a centralized blockchain as long as you can get the funds over the bridge before the validators pay attention to block it, that's pretty common too. A flight to security.

woah 5y ago
It sounds like the component that was compromised was a bridge controlled by the same validators. I'm glossing over the different components of the system for simplicity.

iskander 5y ago

The security practice here is even worse than what you're describing, the company servers had been authorized to sign on behalf of the DAO, so only one compromise was required to get 5/9 validators.

freeAgent 5y ago
It was decentralization theater. When a single entity can control the network (or funds), making multiple keys all controlled by that same entity is pointless.

sk55 5y ago

100% this.

phphphphp 5y ago

Most cryptocurrency dunking is because of exactly what you describe: the technology, in its purest form, can avoid a certain category of problems... but those problems are rarely relevant and instead the "cryptocurrency" industry is just a bunch of people chanting the word "blockchain" over and over again as they code their way into a plate of spaghetti. Axie Infinity is one of the shining stars of the cryptocurrency world, it's the game that'll change the world for the better by bringing people out of poverty... oh, wait, no, it's just another shit show. Whether they got hacked in this way or not, whether they used a blockchain or not, it wouldn't change the fundamental reality that Axie Infinity is a garbage fire, and that's why people are well-informed when they are dunking on cryptocurrency, because even in its purest most magical well used form, it's literally a database. A database! The idea that Axie Infinity was great EXCEPT FOR the choice not to use a blockchain is so far from reality. I'd go as far as to say this hack is merciful and will finally bring an end to yet another bullshit, predatory project. The hacker has done the world a service, half-a-billion is a fair reward. (I don't want to distract from my point that this is all bullshit, but in these parentheses I'll add that your point doesn't follow, because the fact that they use a side chain with centralised validators is immaterial. The hack happened because private keys were stolen, which is just as much of a vulnerability if this happened entirely on the main ethereum chain where acquiring the various private keys required to create a legitimate multi-signature is just as possible. You're assuming if they had "just" used a blockchain they would have magically been smart enough not to keep keys lying around where they could be misused... the key takeaway here is that a technology that can be party to a half-a-billion loss because someone was dumb is not good technology)

woah 5y ago
> the fact that they use a side chain with centralised validators is immaterial. The hack happened because private keys were stolen, which is just as much of a vulnerability if this happened entirely on the main ethereum chain where acquiring the various private keys required to create a legitimate multi-signature is just as possible. No, you're wrong. The number of unique validators is at the heart of this hack, since these validators were also responsible for bridging money. If the chain had a decentralized validator set and the bridge used that same set, the hackers would have had to compromise 20-100 systems to execute the attack, which is very unlikely. I'm also genuinely curious: why do those who criticize blockchain most stridently on HN also know the least about it? It seems like there is an echo chamber of people who hate blockchain, refuse to learn anything about it, and yet talk about it a lot.

runeks 5y ago

> The system that was compromised was a "proof of authority" chain. These are different from proof of work or proof of stake chains that have hundreds or thousands of distinct validators. This is true. However, it should be mentioned that the difference between hacking a "proof of authority" chain and a "proof of stake" chain lies only in quantity: the number of private keys you have to compromise. Once a set of private keys owning a stake majority in a proof-of-chain have been compromised, that chain is no longer usable because the “evil” majority can create an infinite number of longest chains (starting from that point in time) using its stake majority, thus making it impossible to reach consensus on a chain in a decentralized manner. With proof-of-work, gaining a majority of hashing power only allows you to temporarily create one longest chain, which will be ignored once an honest majority regains sufficient hashing power.