Bittensor Suspends Network Operations Following 8 Million Wallet Drains

Bittensor Stops Network Operations After $8 Million Wallet Emptied


Hassan Shittu
Last updated:
July 3, 2024, 11:23 EDT
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2 min read


Following a significant security breach that resulted in the theft of over $8 million in cryptocurrencies, Bittensor has halted its operations on July 3. This event contributes to the ongoing security issues in the crypto industry, where hacks and exploits continue to impede widespread adoption.
Immediate Response to Wallet Drain
On July 3, Bittensor, one of the largest AI-focused decentralized networks with a market capitalization of $1.6 billion, stopped its network activity after a series of wallet drains led to the theft of at least $8 million worth of digital assets. Bittensor, which connects machine learning models owned by individuals worldwide, initiated the network outage to contain the exploit. Co-founder Ala Shaabana announced on X that they have contained the attack and put the chain into safe mode, with blocks producing but no transactions permitted. The team is still investigating and considering all possibilities.
The theft was first identified by pseudonymous on-chain investigator ZachXBT, who announced in a July 3 Telegram message that Bittensor had been halted due to additional thefts earlier that day, potentially resulting from a private key leakage. Reports indicated that an unknown address, “5FbW,” was exploited to obtain 32,000 Bittensor (TAO) tokens valued at approximately $8 million. This attack follows a similar incident on June 1, where another wallet was drained of $11.2 million worth of TAO tokens, as reported by ZachXBT.


June 1 TAO $11 million drain.
Source:
ZachXBT
Following the attack, the price of TAO tokens dropped by 15%. It saw a slight recovery after the Bittensor team assured the community of ongoing measures to prevent further incidents. On the project’s Discord channel, a Bittensor core team member announced: Co-founder Ala Shaabana confirmed on X that the chain was in “safe mode,” with blocks being produced but no transactions processed. Blockchain trackers indicated that the last transactions and blocks were processed around 23:00 UTC on Tuesday.
Shift in Attack Strategies Amid Crypto Theft
While smart contract vulnerabilities were once the main cause of substantial crypto thefts, private key leaks have become more prevalent. Mriganka Pattnaik, co-founder and CEO of Merkle Science, stated that hackers now increasingly target areas outside smart contracts, such as private key leaks, often due to phishing attacks or insecure storage practices, leading to significant losses. In contrast, losses due to smart contract vulnerabilities fell by 92% in 2023, dropping to $179 million from $2.6 billion in 2022.
This year, the crypto market saw a revival following the US SEC’s approval of Bitcoin ETFS in January, which raised the sector’s valuation from $1.76 trillion in February to $2.32 trillion. However, the industry continues to face major security challenges, as highlighted by various hacking incidents. PeckShield reported that Btcturk experienced the biggest crypto-related hack in June, losing an estimated $100.25 million. Lykke also faced a major hack, resulting in a $22 million loss. Despite these incidents, April saw a notable decline in combined losses from crypto hacks and scams, with only $25.7 million lost, the lowest monthly total since 2021.
In the first quarter of 2024, $336 million was lost to Web3 hackers and fraud, a 23% decrease from the same period in 2023. Notably, seven specific cases have recovered $73.9 million of stolen Web3 capital.
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