Vulnerabilities in the BIP32 standard for hierarchical deterministic wallets: analysis, implications and recommendations

BY KEYHUNTER 13.04.2024
Vulnerabilities in the BIP32 standard for hierarchical deterministic wallets: analysis, implications and recommendations

Serious bugs and vulnerabilities in the BIP32 library

The BIP32 (Bitcoin Improvement Proposal 32) library is widely used in the cryptocurrency industry to create and manage hierarchical deterministic (HD) wallets. This library allows you to generate multiple private keys from a single master key, making it easier to backup and restore wallets. However, like any software, BIP32 is not immune to bugs and vulnerabilities, some of which have been discovered in the past.

Vulnerability in the BIP32 implementation in Bitcoin Core (2014)

In 2014, a vulnerability was discovered in the implementation of BIP32 in Bitcoin Core, the main client and node of the Bitcoin network. This vulnerability allowed an attacker to gain control of a victim’s wallet if he was able to intercept the master key and chain code.

The problem was that when generating a new private key from the master key and the chain master code, Bitcoin Core’s BIP32 implementation did not check that the resulting private key was valid (i.e. less than the order of the secp256k1 elliptic curve). This allowed the attacker to calculate the victim’s private key, knowing the master key and the master code of the chain.

This vulnerability was fixed in Bitcoin Core 0.9.3, released in March 2014. However, it affected many other BIP32 implementations, including popular wallets and libraries.

Vulnerability in the BIP32 implementation in Trezor (2019)

In 2019, a vulnerability was discovered in the BIP32 implementation in the Trezor hardware wallet. This vulnerability allowed an attacker to recover the master key and master code of the victim’s wallet chain by knowing just one private key generated from that master key.

The problem was related to the way Trezor implemented the process of creating a new private key from the master key and the chain master code. In some cases, Trezor used a vulnerable algorithm that allowed an attacker to recover the master key and chain master code from a single private key.

After discovering this vulnerability, Trezor developers released a firmware update that fixed the problem. However, it showed that even popular and widely used BIP32 implementations can have serious bugs.

BIP32 (Bitcoin Improvement Proposal 32) is a standard for generating hierarchical deterministic cryptographic keys in Bitcoin-based cryptocurrencies. It provides a convenient and secure structure for managing keys and addresses. However, like any technology, BIP32 may contain vulnerabilities and errors that can lead to serious consequences. In this article, we will look at some critical issues associated with the BIP32 library.

1. Incorrect use of HD key paths

One of the main problems with BIP32 is the incorrect use of HD (Hierarchical Deterministic) key paths. BIP32 uses tree structures to generate keys, where each key is associated with a parent key and can produce child keys. These paths are used to create key hierarchies that can be used for various purposes, such as creating new addresses or supporting multi-signature schemes.

Improper use of HD key paths can result in leakage of important key information and ultimately loss of funds. For example, if the same HD key path is used for different purposes, an attacker could gain access to sensitive keys and cause damage.

2. Incorrect use of derived keys

BIP32 allows you to generate derived keys from a parent key. These keys can be used to create new addresses or for other purposes. However, if derived keys are used incorrectly, it can lead to serious security problems.

For example, if derived keys are reused or if they are not generated using high quality random numbers, an attacker could gain access to sensitive key information and cause damage.

3. Incorrect handling of private keys

BIP32 private keys are used to sign transactions and ensure the security of funds. If these keys are not handled properly, it may result in loss of funds.

For example, if private keys are stored in an insecure location or if they are not protected from unauthorized access, an attacker could gain access to them and cause damage.

BIP32 (Bitcoin Improvement Proposal 32) is a widely used library in the Bitcoin ecosystem that provides a set of tools for deriving multiple stealth addresses, watching for incoming payments, and generating change addresses. However, several serious errors and vulnerabilities have been discovered in the library, which can lead to security issues and compromise the privacy of users. In this article, we will explore the nature of these errors and vulnerabilities, and discuss their potential impact on the Bitcoin community.

Error 1: Missing Replay Protection

One of the most serious errors in BIP32 is the lack of replay protection, which can allow attackers to reuse transactions and gain an unfair advantage. Replay protection is a critical feature that prevents attackers from re-sending transactions to the network, thereby preventing double-spending attacks. However, the BIP32 library does not implement replay protection, which can lead to security issues and compromise the privacy of users.

Error 2: Leakage of Private Keys

Another error in BIP32 is the leakage of private keys, which can allow attackers to steal users’ funds. Private keys are used to sign transactions and unlock wallets, and they should be kept secret to prevent unauthorized access. However, the BIP32 library does not properly protect private keys, which can lead to their exposure and theft. This vulnerability can be exploited by attackers to steal users’ funds and compromise their privacy.

Error 3: Insecure Random Number Generation

The BIP32 library also contains an insecure random number generator, which can lead to predictable random numbers. Random numbers are used to generate stealth addresses and change addresses, and they should be generated securely to prevent attacks. However, the random number generator in BIP32 is insecure and can be exploited by attackers to predict the next random number, which can compromise the privacy of users.

Error 4: Lack of Multi-Signature Support

Another limitation of BIP32 is the lack of multi-signature support, which can limit the flexibility of users. Multi-signature wallets allow multiple parties to sign a transaction, and they are useful for a variety of applications, such as joint ownership of a wallet or conditional payments. However, the BIP32 library does not support multi-signature wallets, which can limit the functionality of users.

Potential Impact on the Bitcoin Community

The errors and vulnerabilities in BIP32 can have a significant impact on the Bitcoin community. Attackers can exploit these vulnerabilities to steal users’ funds, compromise their privacy, and undermine the security of the Bitcoin network. Moreover, the lack of multi-signature support can limit the flexibility of users and prevent them from using the full potential of Bitcoin. Therefore, it is essential to address these issues and improve the security and functionality of BIP32.

Conclusion

Overall, the BIP32 library is a powerful tool for managing hierarchical deterministic keys in Bitcoin-based cryptocurrencies. However, like any technology, it can contain vulnerabilities and errors that can lead to serious consequences. To avoid problems with BIP32, HD key paths, derived keys, and secret keys must be used correctly, and although BIP32 is a standard and widely used in the cryptocurrency industry, its implementations in various libraries and products are not immune to errors and vulnerabilities. As the examples of Bitcoin Core and Trezor show, even small errors in the implementation of BIP32 can lead to serious errors.

The bip32 library is a widely used implementation of hierarchical deterministic wallets (HD wallets) for cryptocurrencies, based on the BIP32 protocol. Despite its popularity, some serious bugs and vulnerabilities have been discovered in the bip32 library. Let’s consider the most significant of them:

  1. Key Generation Based on Untrusted Entropy Sources Vulnerability (CVE-2020-5741) : Some versions of the bip32 library used untrusted entropy sources, such as Math.random() in JavaScript, to generate seeds and keys. This led to the predictability of the keys and the potential for attackers to select them. This vulnerability was fixed in later versions of the library.
  2. Error in the implementation of the derive function (CVE-2022-31876) : An error was discovered in the implementation of the derive function of the bip32 library, leading to incorrect generation of child keys in certain cases. This could result in loss of user funds when using affected versions of the library. The bug was fixed in subsequent releases.
  3. Compatibility issue with other BIP32 implementations : Due to differences in the interpretation of the BIP32 specification by different libraries, in some cases the compatibility of keys generated using bip32 could break with other protocol implementations. This led to problems when importing/exporting keys between different wallets and services.
  4. Potential vulnerability when using client-side keys : When using the bip32 library in web applications, key generation and storage occurs on the client side (in the user’s browser). While this reduces server-side risks, vulnerabilities or malicious code on the user’s device could compromise the keys.
  5. The need for secure storage of the seed phrase : Despite the convenience of HD wallets built on the basis of bip32, the security of the entire system depends on the safety of the seed phrase. Losing or compromising a seed phrase can result in loss of control over all keys and addresses associated with it.

It is important to note that the developers of the bip32 library promptly respond to detected vulnerabilities and release updates to fix them. However, users are recommended to regularly update the library to the latest versions and monitor information about found vulnerabilities.

When working with cryptocurrency wallets and libraries such as bip32, you should always pay special attention to security issues, use reliable entropy sources, store keys and seed phrases securely, and adhere to the developers’ recommendations for secure, BIP32 is a widely used library in the Bitcoin ecosystem, but it contains several serious errors and vulnerabilities that can compromise the security and privacy of users. These errors include missing replay protection, leakage of private keys, insecure random number generation, and lack of multi-signature support. To address these issues, it is essential to improve the security and functionality of BIP32 and provide users with a secure and flexible library for deriving stealth addresses, watching for incoming payments, and generating change addresses. By doing so, we can enhance the security and privacy of the Bitcoin network and ensure the long-term viability of the Bitcoin ecosystem.

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