Using weak seed phrases means instant loss of funds on the Bitcoin network.
The concept of a blockchain "dark forest" has been popularized recently by Ethereum and the existence of front-running bots that will copy any profitable transaction pending for submission.
The bots are able to assess if any given transaction that just entered the mempool can be replicated, and they will immediately publish their own copy with a much higher gas fee, which virtually guarantees that they will be the first to claim it. The term "dark forest" is inspired from a sci-fi novel and indicates a place where detection means instant death — or in this case loss of funds.
In Ethereum, this usually happens with public smart contracts that for some reason came in control of funds. Dan Robinson from Paradigm Capital demonstrated one such case with money mistakenly sent to a contract address. These types of bots also threw a wrench into Bancor’s vulnerability mitigation plan in June.
Bitcoin (BTC) does not have smart contracts to front-run, but a post by BitMEX Research highlights how a similar event occurs when one uses brainwallets.
A brainwallet is the term for a private key that is only stored as a memory in a person’s brain, meaning that no physical backups exist. This approach is generally discouraged because relying on a person's memory to store a complex alphanumeric string is not ideal.
A potential solution to this is creating a wallet from an easy to remember phrase. This is what the analysts did by generating a seed phrase from extracts of famous literary works, including the Bitcoin whitepaper.
Unfortunately, in some cases the BTC put into these wallets was swept away even before the transaction to fund them was confirmed. This was the case with simple seed words like “Call me Ishmael” from Herman Melville’s Moby Dick. Other longer and more complex excerpts were still swept within a day, with the Bitcoin whitepaper’s “The network is robust in its unstructured simplicity” lasting the longest.
The analysts concluded that addresses generated from these types of complex, but public-domain seed words are fully compromised and are constantly being monitored.
As Cointelegraph reported earlier, blockchain makes it hard to use any type of password-based generation mechanism. Passwords on traditional platforms are mostly protected by the fact that they’re stored on a secret database. The attackers must interact with it to make guesses, but the server will usually issue rate limit denials. Furthermore, having to make a web request to make a guess is already many times slower than hashing through locally-stored combinations.
Blockchain private keys can instead be pre-generated from massive dictionary databases, making attackers the effective owners of those addresses. There are ways to mitigate these vulnerabilities by using salt — random bits of data added to throw off brute force attempts. But the fundamental issue of brainwallets is that any address that is sufficiently resistant to brute forcing will likely be difficult to remember reliably.
There are many stories of people losing their BTC by forgetting a private key they stored in their brain, with one notable loss of $13 million reported in 2019 — though some believe it was fake. Ethereum is likely subjected to the same type of private key brute forcing, with millions of dollars in Ether (ETH) being reportedly stolen in the past.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.
Recommended Content
Editors’ Picks
US presidential election outcome could shape the future of crypto
US citizens will go to the polls to elect a new president on November 5, and their choice could be key for the future of the crypto industry and thus the price outlook for Bitcoin (BTC).
Bitcoin ETFs beat Gold ETFs with 65% gain since launch
Bitcoin ETFs have reshaped the digital asset investment landscape since their approval in January. Their total assets under management climbed over $70 billion during the weekend, placing them ahead of other investment products, including gold.
XRP eyes 10% rally amid relisting across crypto exchanges and growing institutional demand
Ripple's XRP is trading at $0.5050 up slightly by 0.2% in the past 24 hours as it struggles to sustain a move above a key symmetry triangle resistance. Meanwhile, in its recently released Q3 report, Ripple noted the rising listing and relisting of XRP across crypto exchanges and global platforms.
Ethereum Price Forecast: ETH struggles below $2,500 amid State of Michigan pension fund investment in ETH ETF
Ethereum is trading near $2,420, down about 1% on Monday, but could bounce off a key descending trendline close to the $2,258 historically high demand zone. Meanwhile, the State of Michigan pension fund revealed an investment of $11 million in ETH exchange-traded funds.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.