Key Leak at Major Ethereum Staking Protocol Sparks Emergency Measures

Lido Finance is taking swift action after a private key linked to one of its oracle participants, Chorus One, was compromised. By: Sam Francis

A private key belonging to one of Lido Finance’s (CRYPTO: LDO) oracle participants, Chorus One, has been compromised, leading to the activation of emergency measures by the DeFi protocol.

The incident, which occurred at some point before August 8, sparked a vote by the Lido DAO to remove and replace the affected node. The key is used within Lido’s oracle system, a component that collects and relays validator data.

What Happened: The compromised key was part of a 5-of-9 multisignature setup used for Lido’s oracle. The breach was limited in scope and did not grant access to any user funds or allow for the control of protocol operations.

However, due to the critical nature of the oracle system for smoothly running the protocol and its smart contracts, the Lido DAO quickly mobilized to address the issue.

The compromised node was identified as one of the five required to generate valid BLS signatures for new blocks, which are then used to process the oracle’s state transitions.

Despite the breach, the protocol’s core operations were not affected, and all other oracle members remained uncompromised and fully operational.

The incident came to light after a minor unauthorized transaction of 1.4 ETH in gas fees was executed from the compromised node. These funds were not part of Lido’s protocol assets or user balances.

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What’s Next: In response to the incident, the Lido DAO swiftly initiated a vote to remove and replace the affected node. The vote will decide whether to delegate the remaining 24-month portion of the node’s commission to another operator.

The compromised node was operating on behalf of Chorus One, a leading blockchain infrastructure provider.

Earlier this year, Lido announced plans to introduce a decentralized oracle system to replace the existing centralized model. This move was intended to enhance the protocol’s security and resilience.

Lido is a leading liquid staking protocol on Ethereum (CRYPTO: ETH), enabling users to stake their ETH and maintain liquidity. The protocol allows users to stake their ETH and receive stETH tokens in return, which can be used in various DeFi protocols.

Recently, Lido announced the integration of its liquid staking solution with the Frax (CRYPTO: FRAX) stablecoin. This integration aims to facilitate seamless liquidity provision for both protocols’ users.