Harmony blockchain to rollback network after 4 trillion ONE tokens were fraudulently issued.
The Harmony blockchain is preparing to revert its network to a state prior to a significant exploit that resulted in the unauthorized generation of approximately 4 trillion ONE tokens.
The decision to restore the network was made by the development team to eliminate the fraudulent tokens while safeguarding legitimate assets. A single restoration point has been selected for both shards to effectively manage this rollback.
Rollback Implementation Details
Harmony has identified the following checkpoint blocks for the rollback:
- Shard 0 — block #92,730,034;
- Shard 1 — block #94,978,278.
These blocks date back to August 11, 2026, at 23:25:37 UTC. Following this restoration, validators will receive new databases, allowing operations to resume from block #92,730,035 for Shard 0 and block #94,978,279 for Shard 1.
The exploit began on August 12, with the initial attack detected in Shard 0 at block #92,730,036, leading to the issuance of approximately 3.01 trillion counterfeit ONE tokens through several inter-shard transactions and four attacker wallets. The total fraudulent issuance represented around 27% of ONE's circulating supply.
Challenges in Addressing the Exploit
The Harmony team considered multiple alternatives to executing a rollback but ultimately dismissed these options due to the potential risk to user funds. For example, burning the tokens was deemed too hazardous since the fraudulent tokens had already circulated through various exchanges and wallets, making it impossible to safely destroy them without impacting legitimate assets.
Blacklisting addresses was also ruled out because it would not remove the fraudulent tokens already in circulation and could inadvertently block unrelated wallets. Selective recovery of transactions posed similar risks, as it might alter outcomes for legitimate transactions, particularly those involving swaps and staking.
Consequently, the team opted for a blanket rule that would discard all blocks following the selected checkpoints, including both fraudulent and legitimate transactions.
Investigation into the Exploit's Cause
The exploit stemmed from a vulnerability in the mechanism for confirming inter-shard transactions, which allowed for the reprocessing of receipts that had already been used. Additionally, issues were found with the quorum verification for staking committees, where a zero BLS signature could erroneously pass checks. The development team is currently examining whether this bug was exploited during the incident.
Token Tracing and Collaboration Efforts
So far, over 99.9% of the counterfeit ONE tokens have been traced to specific wallets or services. However, the developers noted that this tracing does not facilitate the safe destruction of the illegitimate tokens. Lists of implicated addresses have been shared with exchanges and LayerZero, and the team is engaging with trading platforms, bridges, and law enforcement to address the issue.
Impact of the Rollback on Transactions
The rollback will significantly affect tens of thousands of transactions. Harmony analyzed 141,628 consecutive blocks in Shard 0, which included a large number of automated DEX operations. Out of these, only 22 transactions were straightforward transfers of ONE without dependencies, and even these were not guaranteed to be safe for recovery due to their links to smart contracts and other factors.
As a result of the rollback, balances and transaction states will change, meaning that transactions that failed in the original chain might succeed in the restored version. The team concluded that selective recovery was too risky to pursue.
Current Status of the Network
Harmony has halted Shard 0 at block #92,753,555 in preparation for the rollback. The team has developed a code change request and a binary file for the recovery process, but the final implementation will require consensus from validators and exchanges, as well as the fulfillment of necessary technical conditions.
Additionally, during this period, user losses connected to the ongoing attack on vulnerable Coldcard hardware wallets have reportedly reached at least 1,700 BTC.
