Hackers Can Steal Bitcoin with New ‘Dark Skippy’ Method

Security researchers have uncovered a critical vulnerability in Bitcoin hardware wallets, dubbed “Dark Skippy,” which could potentially allow hackers to extract private keys from devices using only two signed transactions. This discovery highlights the ongoing challenges faced by the cryptocurrency industry in safeguarding user funds.

The Dark Skippy attack exploits a flaw in hardware wallet firmware, enabling malicious actors to embed portions of a user’s seed words into “low entropy secret nonces.” These nonces are subsequently used to sign transactions, with the resulting signatures posted to the blockchain.

By analyzing these signatures, attackers can extract “public nonces” and employ Pollard’s Kangaroo Algorithm to compute the corresponding secret nonces. This mathematical process ultimately reveals the user’s complete seed words, granting full control over their Bitcoin holdings.

Previous attacks targeting hardware wallets required the victim to post numerous transactions to the blockchain, a process known as “nonce grinding.” Dark Skippy represents a significant advancement, as it can be executed with as few as two transactions, making it significantly more efficient and less detectable for attackers.

While the researchers emphasize that Dark Skippy exploits an existing vulnerability rather than introducing a new one, the discovery highlights the importance of ongoing security research and development in the hardware wallet industry.

To protect against Dark Skippy attacks, hardware wallet manufacturers are urged to implement robust security measures, including secure boot processes, locked JTAG/SWD interfaces, and reproducible and vendor-signed firmware builds. Users are also advised to adopt physical security practices, such as storing devices in secure locations or using tamper-evident bags.

Additionally, the development of “anti-exfiltration” signing protocols, which prevent hardware wallets from generating nonces independently, can further enhance security.

The Broader Threat Landscape

The vulnerability exposed by Dark Skippy underscores the broader challenges facing the cryptocurrency ecosystem. In recent years, numerous attacks have targeted Bitcoin wallets, resulting in significant financial losses for users.

For instance, a flaw in the Libbitcoin explorer library led to the theft of over $900,000 worth of Bitcoin in August 2023. Similarly, a vulnerability in the BitcoinJS wallet software put $2.1 billion worth of Bitcoin at risk.

These incidents highlight the urgent need for continued security research and development within the cryptocurrency industry. As the value of digital assets continues to grow, so too does the incentive for malicious actors to target vulnerabilities in hardware wallets and other digital infrastructure.

The discovery of the Dark Skippy attack serves as a stark reminder of the evolving threat landscape faced by cryptocurrency users. While hardware wallets offer a high degree of security, they are not immune to vulnerabilities. The cryptocurrency industry must remain vigilant in its efforts to protect user funds and develop countermeasures to emerging threats.