Security Breach: Atomic Wallet Hack Exposes User Assets Worth $35M+ : Lessons Learned and Building Safer Wallet Infrastructures

In the continuity of wallet vulnerabilities, another "Hot Wallet" fell into the pitfall of wallet drain activity. The wallet was Atomic Wallet, and it directly affected user assets upto $35M+

Here is why and how this hack happened and what could have been a more secure strategy:

#AtomicWallet, with over 5M+ users, is primarily a non-custodial #decentralized Hot Wallet that allows buy, stake & swap. The hack attacked an array of user wallets ranging from BTC-ETH to DOGE-LTC and USDT as well. Tron-USDT seems to be the biggest token type stolen.

The attack which seemed arbitrary at first, but now, with an investigation, it looks like a pre-meditated and well-planned. It is evident that the attackers were able to crack Atomic Wallet's Hot Wallet, where all of the user funds were secured.

The drain activity is continuously being monitored and back-tracked, where:

• Largest wallet saw $7.95M stolen
• Five of the biggest losses account for $17M

#AtomicWallet claimed that only 1% of users were impacted, and they have already started recovering some user wallet amounts.

Our Analysis:

But, one fascinating fact about this hack is that we saw transaction histories being erased, pointing towards a bigger sum to be at risk here. While the attack isn't fully dissected, on-chain analysis depicts strategic attack planning.

Since the Hot Wallet is based on self-custody, users have full control over their assets. But it still points towards a native vulnerability in the #AtomicWallet Hot Wallet.

As per the fund-flow analysis, there is a pattern in the address involved in the hack. The pattern indicates that hackers had an in-depth understanding of wallets and knew how to mask the tracks for transaction trails.

?? Victim: Address drained

?? Direct Drainer: Stolen Assets transferred address

?? Keeper: Current address holding stolen assets

?? Gas Fee Provider: Provided assets to the victim or direct drainer for transaction

The conjecture around the wallet security points to a bug update that sends the private key to an attacker when opening the app.

Conclusion:

In totality, this hack again sets a precedent for how crucial it is for Institutions, even those that offer self-custody services to their users, to implement intricate wallet infrastructure and security checks at the backend.

User-stored wallets need to be secured in a multi-layer setting that consolidates private key management and decentralized access to wallet operations.

Wallet providers like #AtomicWallet must diversify their wallet infrastructure security architecture around Hot Wallets.

How can you as an enterprise avoid such incidents:

At Liminal, we focus on building backend infrastructures for Institutions to help them safeguard not just their Hot Wallets but entire wallet operations, on-chain & off-chain.

Our Hot Wallet boasts a rich stack of security features to protect such hacks from happening. This includes:

?? From Private key management to Key recovery module

?? From Multi-sig to MPC authorization

?? Automatic Hot Wallet sweep and refill

?? Instant connectivity with Cold Wallet

?? An industry-standard authorization seal of secure wallet functionality.

We understand how vulnerable Hot Wallets hacks can be for an Institution.

To mitigate such hacks and threats in wallet operationality at scale, we are building an intelligent custody solution meant to safeguard Institutional and ultimately users #DigitalAssets at large.