Electrum Patches Wallet Flaw Exploited Through Malicious Servers

Bitcoin wallet Electrum released version 4.8.3 on Oct. 24 and urged all users to upgrade to fix a flaw that lets a malicious server trick them into signing payments to an attacker.

The project's security advisory lists versions before 4.8.3 as affected and says some servers are already carrying out the attack. Developers received two user reports, including one from a user who lost money after increasing a transaction's fee.

“This release fixes a critical security issue, so we urge all users to upgrade,” Electrum wrote in its release announcement.

Electrum relies on servers for transaction history and broadcasting payments. Its documentation says the main server is trusted about unconfirmed transactions. The attack exploits that trust.

According to the advisory, a malicious server can withhold a user's original payment and insert a conflicting transaction into the wallet's history that replaces the intended destination with an attacker-controlled address. That transaction has invalid signatures, but older clients did not check them before displaying it as unconfirmed.

If the user then manually raises its fee using replace-by-fee, or RBF, the wallet signs the altered transaction, paying the attacker. Both user reports involved attacker addresses made to match the last four characters of the intended destination, the advisory says.

Version 4.8.3 now checks signatures on inputs spending the wallet's own coins before adding unconfirmed transactions to its local history. Electrum says clients connecting to trusted servers, such as their own, are not affected by this attack.

Bull Bitcoin Plans Similar Checks

Bull Bitcoin CEO Francis Pouliot said its BULL wallet connects by default only to two servers run by Bull Bitcoin and one run by Blockstream. Users must manually add an address to connect to another server, he said.

Pouliot said BULL users were unaffected unless they had manually selected a compromised server. “Nevertheless, we are immediately adding a client-side validation using the same approach as Electrum wallet,” he wrote.

Electrum's advisory urges users to upgrade. As a workaround for those who have not, it says to verify destination addresses and amounts whenever signing a transaction, including a fee increase. The project's download page tells users to obtain the software only from electrum.org and verify its GPG signatures.