The year 2021 saw a significant rise in global crypto adoption and this is sending in enough signals to establish the fact that cryptocurrencies are truly the money of the future. While the impressive adoption rate inspires many sectors to begin to test run the viability of the blockchain in business development, there is a corresponding backward adoption, also playing a key role in cooling the steaming force a lot more than required.
Different types of cryptocurrency scams resulted in the loss of about $8 billion worth of numerous cryptocurrencies within the last year. Leading these events are the recently evolved and highly successful rug pulls which we have previously explained. Particularly important, however, are time bandit attacks on Ethereum which not only pose risks to investors but also tarnish the overall image of the Ethereum blockchain in terms of investor security and public usability.
As in the previous times when we explained numerous kinds of scams and the risk situations involved (and what we at Lossless are doing to help the respective situations), we, this time again, create an awareness of time bandits attacks on Ethereum and invite the community to enforce safety standards.
What Is A Time Bandit Attack On Ethereum?
Time bandit attacks are a Miner/Maximal Extractable Value (MEV) strategy that involves the reorganization of past blocks. If the reward is great enough, Ethereum miners may be incentivized to propose competing blocks containing altered transactions at the expense of users and other network stakeholders.
This type of network exploit is particular to Ethereum miners and this makes it extremely alarming and a great point of interest. To many, it may appear that those charged with securing and confirming transactions on the Ethereum network may be able to tweak the network in a way that seems highly beneficial to them. Another serious implication is the fact that this denigrates the trustless nature of the Ethereum blockchain.
According to Coindesk,
“You think your transaction is confirmed and then suddenly it goes away, and it may or may not be included in the next block. So it breaks user experience to a certain extent, and is not really good for the stability of the blockchain.”
Time bandit attack is nothing similar to double-spending, where a single cryptocurrency transaction is delivered to at least two receivers. However, it does have a great similarity to the 51% attack on the Bitcoin blockchain. Time bandit attack presents a situation that puts up Ethereum transactions auctionable in the free market. For example, if you found very lucrative MEV opportunities in the last blocks, you can put up a proposal to rewrite Ethereum’s history and re-mine certain blocks of interest in order to make a profit from the opportunity you found in the past. In order to rewrite history, a reward is offered for the miner that executes this attack, incentivizing them to do so.
This mechanism puts up the consensus of the present state of the chain up for auction to the highest bidder. Different from controlling 51% and performing this attack, in the case of time bandit, anyone can put up a proposal to rewrite the history and offer a reward to miners for doing so. As you may think, this puts the integrity of the Ethereum network at risk for a few extra bucks.
There is a bright side to this possibility, an option of which is also exploitable. Time bandit attacks are quite difficult to pull off as the miners will need about 40% of the total Ethereum network hash power in order to successfully facilitate a time bandit attack. Under these circumstances, the miners are able to split the network, being in control of a vast network of hash power. All things being equal, the miners may have their own versions of transaction history rewrite of the main Ethereum chain.
As things stand presently, the fierce competition among Ethereum network miners in order to gain block rewards significantly reduces the possibility of any group of miners wanting to go rogue and cheat the system. That, unfortunately, and the difficulty involved is the only saving grace at the moment, not to say that time bandit attacks are an outright impossibility.
A Typical Case
A popular type of MEV is that which was laid out by Twitter user, @bertcmiller.
In the event described, a searcher was extremely distraught because apparently, only 1 of 3 transactions in their bundle landed on-chain. According to him, what’s worse is someone else’s transaction seemed to have been added instead of their own.
Following the report, a look into the set of transactions appeared to have revealed the truth about the incident. Only the “buy” part of the total sandwich bundles they submitted had landed on the next block records, and right after that buy order, someone else had inserted their own set of transactions, in order to create an arbitrage opportunity.
In the sum up of what actually happened, A miner’s bundle was included in an uncled block (uncle blocks are created in Ethereum blockchains when two blocks are mined and submitted to the ledger at roughly the same time). An uncled time bandit attack is a typical type of MEV that has been proven to be a possibility.
An attacker recognized this, took only the buy part of the transaction, neglected the rest, and added an arb after it. Eventually, the attacker then submitted that as a bundle of transactions, which was then mined.
The effort was said to have generated approximately 0.4 ETH from the above steps. However, it may be enough to incentivize many other miners to replicate the act going forward. Only a matter of time before someone becomes highly successful and makes way with a ton of ETH.
Attempts to create a decentralized application that facilitates time bandit attacks on the Ethereum network were met with backlash recently on social media. The negative community response to “open exploration” exposing the root of this issue on the network sets a bad example for transparent discussion about possible improvements on the Ethereum blockchain.
Unfortunately, as we move further towards ETH 2.0 and the corresponding significant changes on the ETH blockchain, Ethereum miners may have to retire their responsibilities for a new Proof-of-Stake (PoS) consensus. There is therefore a possibility of collusion between miners who may then be interested in a short-term gain.
Finally, it is not out of the question to ruminate on whether Ethereum could create a system to counteract MEV into the protocol. To keep things quite straightforward, there is no possibility at this time, not without altering Ethereum’s developer and/or user experience.
It is the reason, therefore, that we must think about additional safety measures when it comes to potential losses of any kind in crypto. And that’s what Lossless is all about.
Lossless is the world’s first DeFi hack mitigation tool for token creators. Apart from our known cyber security solutions and renowned professionals, the community also plays a role. With a tangible reward system, community members are also encouraged to explore new ways to detect hacks and fraudulent transactions.
Our protocol halts counterfeit transactions through various methods of fraud identification and automatically reverses any stolen tokens back to the original owner. Our solutions to the impending problems of cyber theft within the blockchain space are thorough and applicable within many protocols.