Bittensor Halts Network Amid Wallet Security Breach

Bittensor developers have temporarily suspended the network due to a suspected security exploit targeting several wallets.

On-chain analyst ZachXBT revealed that the incident might involve the leakage of private keys, which could lead to unauthorized access and potential thefts.

Bittensor Halts Operations

A Bittensor community Discord administrator, const [т, T], announced that all transactions have been paused. This was done to prevent further unauthorized access while the team investigated the issue. The administrator stated that they were looking into the attack that involved some Bittensor wallets.

By way of an update, we have contained the attack and put the chain into safe mode (blocks producing but no transactions are permitted).

We’re still mid investigation and are considering all possibilities. Stay tuned.

— Ala (@shibshib89) July 3, 2024

Co-founder Ala Shaabana confirmed on X that the blockchain was put into “safe mode,” allowing blocks to be produced but halting all transactions. Blockchain trackers for the Bittensor network show that the last transactions and blocks were processed around 23:00 UTC on Tuesday.

ZachXBT reported on his Telegram channel that approximately $8 million worth of TAO — equivalent to about 32,000 native Bittensor (TAO) tokens — was stolen. This security breach led to a 17% decline in the TAO token’s value, dropping it to a low of $227. However, the token has since rebounded to trade at $240, representing a 10% decrease within the last 24 hours. According to CoinGecko, TAO has a market cap of $1.67 billion.

The incident is not a first for the project. In June, a user on the platform lost more than 28,000 tokens worth around $11.2 million owing to a phishing attack.

According to ZachXBT, the attacker divided the stolen funds into 18 different wallet accounts, which were then consolidated into 16 accounts. These 16 accounts bridged the tokens from the TAO network to Ethereum, subsequently swapping them for ETH and USDC stablecoins using three different decentralized exchanges.

Crypto Project Scams Remain a Persistent Issue

Crypto projects have increasingly become targets for scammers and hackers over the past few years. Since the beginning of this year alone, losses from hacks and rug pulls have surpassed $473 million across 108 incidents. This is a slight improvement compared to the same period in 2023 when losses exceeded $595 million.

In May 2024 alone, losses due to hacks and fraud amounted to $52.4 million. This represents a 12% decrease from the nearly $60 million lost in May 2023 and a 28% decrease from the previous month.

During this period, decentralized finance (DeFi) projects were predominantly targeted by attackers, with Ethereum and BNB Chains experiencing the highest losses.