Cosmos Labs Faces Criticism Over Disclosure Bug Issue, Leading to Recommendations for EVM Chains to Halt Operations

Cosmos Labs Faces Criticism Over Disclosure Bug Issue, Leading to Recommendations for EVM Chains to Halt Operations

A serious security flaw has been discovered in the shared modules that make up the Cosmos EVM infrastructure, resulting in multiple blockchain networks being affected by attacks that exploited this vulnerability.

Specifically, it is believed that vulnerabilities arose from a combination of several upstream defects, including calculation errors in staking processes, such as underflows. Among the affected networks, MANTRA and Nesa were able to prevent direct impacts on user funds through proactive chain halting measures.

On the other hand, KiiChain suffered a loss of approximately 150 million KII, equivalent to about $9 million at the time’s theoretical price (around 1.43 billion yen), leading to a collapse in token prices. Additionally, around 3 billion TAC, worth approximately $7.5 million (about 1.19 billion yen), was withdrawn from staking contracts, resulting in significant losses being reported.

Growing Criticism from the Community Regarding Disclosure Practices

In this series of incidents, the most strongly criticized aspect by the security community in the cryptocurrency industry and the affected projects is the information-sharing process of Cosmos Labs, the module developer.

After the situation was revealed, Cosmos Labs urgently recommended the halting of EVM chain operations for the affected networks. However, the disclosure of vulnerability fixes that occurred prior to this was handled in a manner close to a silent patch model (post-fix without public disclosure), which has been criticized as extremely inadequate.

Delayed Response and Future Challenges

According to a verification report published by KiiChain, when a critical patch was made public in mid-August, individual notifications were not sent to the affected chains in advance, and there was insufficient warning regarding the importance of the update. As a result, attackers were able to exploit the vulnerability before the patch was applied, having analyzed the code updates.

It has been pointed out that if clear emergency halting measures had been communicated after prior non-public notifications, the damage could have been minimized. Cosmos Labs plans to submit a detailed incident report, but this case has left significant challenges regarding the coordination and disclosure processes of vulnerability information among infrastructure providers in the industry.