Electrum wallet patches security vulnerability; hackers have stolen bitcoins
Electrum has released version 4.8.3 to fix a critical vulnerability in Bitcoin wallets. Developers confirmed that malicious servers have exploited this vulnerability to redirect user payments, and at least one incident of fund theft has occurred.
- Electrum released version 4.8.3 after confirming that a malicious server was exploiting a critical vulnerability.
- Attackers may replace pending Bitcoin payments with fraudulent transactions, and users may mistakenly believe the transaction is legitimate and authorize it when increasing the fee.
- Two users reported the incident, one of whom lost Bitcoin due to an increase in trading fees.
- The vulnerability affects all Electrum versions prior to 4.8.3; the developers have not disclosed the total amount of losses.
- The security patch will verify transaction signatures initiated by coins controlled by the wallet but not yet confirmed.
According to the security advisory issued by the wallet on October 24, attackers exploited how Electrum handles unconfirmed Bitcoin transactions to replace legitimate outgoing payments with fraudulent ones; users may inadvertently authorize these transactions when increasing transaction fees.
Electrum is a lightweight Bitcoin wallet that connects to external servers to retrieve transaction history, broadcast transactions, and obtain other network information. Unlike a full Bitcoin node, this software does not independently process every aspect of blockchain activity.
Its documentation explains that Electrum verifies confirmed transactions using Simple Payment Verification (SPV), but historically has trusted its main server when displaying unconfirmed transactions.
Attackers exploited this discrepancy by intercepting submitted transactions through a malicious server and altering them before they reached the Bitcoin network.
After blocking the broadcast of a legitimate transaction, the attacker can send an alternative transaction to the wallet, changing the recipient address to one controlled by the attacker.
Although the alternate transactions have invalid signatures, the vulnerable version of Electrum does not verify these signatures before displaying them in the wallet history.
This deception becomes dangerous when users attempt to increase transaction fees using Replace-by-Fee (RBF). RBF is a Bitcoin feature that allows an unconfirmed transaction to be replaced by another transaction with a higher fee.
Once a user approves the fee adjustment, they may inadvertently sign a valid transaction that pays the attacker.
Electrum confirms real-world attacks resulting in Bitcoin losses.
Developers disclosed two privately reported incidents, demonstrating that this vulnerability is no longer just a theoretical attack.
On October 11, a user named dannydeezy reported that a transaction shown in the Electrum history did not match the originally submitted payment.
On October 18, another user, Raju-K12, lost funds while attempting to increase trading fees and contacted the developer.
According to the announcement, both incidents involved收款 addresses controlled by attackers, designed to match the last four characters of the target recipient's Bitcoin address.
In the second case, the fraudulent transaction had a zero fee, leading developers to suspect it was intended to lure victims into initiating an operation to increase the fee.
The first incident involved a 2-of-3 multisignature wallet using two Trezor devices. The legitimate transaction included 31 inputs and one output.
Investigators found that all 62 signatures were valid for the original payment but invalid for the substituted transaction. The forged transaction transferred nearly all the bitcoins to a similar address, returning only a small portion back to the wallet.
The original transaction is still valid but never entered the public Bitcoin network.
Electrum acknowledges that, in reality, some servers are indeed carrying out this attack. However, the developers have not disclosed the number of servers involved, the amount stolen, or whether additional victims have been identified.
Electrum 4.8.3 blocks malicious fee-increasing transactions
This fix was included in version 4.8.3 on October 23, and downloadable binary files were made available on October 24.
By submitting 90fe308, the developer introduced signature verification for unconfirmed transactions whose inputs are controlled by the user's wallet.
Electrum will now verify signatures before adding these transactions to the local history, preventing fraudulent outbound payments described in the announcement from being displayed as legitimate transactions.
This update does not turn Electrum into a full Bitcoin node. The developers note that incoming unconfirmed transactions are still not covered by the new signature checks, and confirmed payments continue to use the existing verification process.
Users running versions prior to 4.8.3 are urged to download the update from the official Electrum website.
For users who cannot currently upgrade, developers recommend verifying the full recipient address and amount, including fee-replacement transactions, before signing.
According to the announcement, users who connect only to trusted servers, including their own servers, will not be affected by this specific malicious server attack.
Past attacks on Electrum have shown that server risks repeatedly occur.
This incident continues previous attempts to exploit Electrum’s reliance on external servers.
In December 2018, crypto.news reported that malicious servers had displayed forged software update notices to users. The report at the time estimated losses of nearly $1 million.
Another round of malicious server attacks in 2019 exploited fake wallet updates and denial-of-service activities to direct users to compromised software.
These attacks rely on deceptive downloads, whereas this newly patched vulnerability involves manipulating pending transaction information within an otherwise legitimate wallet.
An article published in 2020 featuring an interview on Electrum servers discussed the trade-offs of lightweight wallets, including their reliance on external infrastructure for transaction history.
Electrum's own documentation states that its client typically connects to about ten servers but selects one primary server to retrieve wallet history and broadcast transactions. The documentation also notes that this primary server is trusted with regard to unconfirmed transactions.