Bitcoin Wallet Electrum Patches Critical Vulnerability Allowing Payment Redirection

Bitcoin wallet Electrum released version 4.8.3 on October 24 to fix a high-severity vulnerability that allowed malicious servers to redirect Bitcoin payments to attackers. The vulnerability affects every version before 4.8.3. The fix was tagged in the code repository on October 23, and executable releases became available the next day.

The attack takes advantage of Electrum's trust in servers when handling unconfirmed transactions. A compromised server can withhold a user's actual payment and substitute a conflicting transaction containing an attacker's destination address and a zero fee. Electrum previously displayed the substituted transaction as legitimate in the wallet history without checking signatures. The zero fee makes the payment appear stalled.

A user who increases the apparent payment's fee signs and broadcasts a new, valid transaction that sends funds to the attacker. The original payment never reaches the network, making the fee-increased transaction the first payment actually broadcast. Electrum developer SomberNight, who published the advisory, said attackers can generate a destination address whose final four characters match the intended recipient's address. A user checking only those characters would therefore see an apparent match.

The advisory says some servers are actively conducting the attack and cites two user reports. A user identified as dannydeezy first reported suspicious server activity on October 11. That manipulated transaction stayed on the local server, and no funds were lost. A second user, Raju-K12, reported losing funds on October 18 after increasing the fee on a manipulated transaction.

Version 4.8.3 checks cryptographic signatures on inputs belonging to the wallet before recording an unconfirmed transaction in local history. The patch prevents a server from inserting a fake transaction involving the user's own addresses without valid signatures, which attackers cannot forge. However, Electrum still accepts incoming transactions without checking signatures when none of the inputs belong to the receiving wallet. SomberNight acknowledged the remaining gap in the advisory and said resolving the gap would require more work.

Electrum previously faced a campaign that began in 2018 and used malicious servers to display fraudulent update notices. The campaign had stolen an estimated $25 million from Electrum users by 2020. Electrum allows anyone to operate a server, making this category of attack possible.

Users connecting only to a server that the users operate themselves are unaffected. Users unable to update immediately should check destination addresses and amounts manually before signing any transaction. Electrum 4.8.3 is available through the project's website and GitHub.