Counterfeiting via Merkle Tree Exploits within Virtual Currencies Employing the CryptoNote Protocol

On 4 September 2014,an unusual and novel attack was executed against the Monero cryptocurrency network. This attack partitioned the network into two distinct subsets which refused to accept the legitimacy of the other subset. This had myriad effects,not all of which are yet known. The attacker had a short window of time during which a sort of counterfeiting could occur,for example. This research bulletin describes deficiencies in the CryptoNote reference code allowing for this attack,describes the solution initially put forth by Rafal Freeman from Tigusoft.pl and subsequently by the CryptoNote team,describes the current fix in the Monero code base,and elaborates upon exactly what the offending block did to the network. This research bulletin has not undergone peer review,and reflects only the results of internal investigation.