Cardano Network Split Sparks FBI Investigation After AI-Fueled Glitch

Key Incident Summary

• The Cardano network suffered a temporary chain split due to a malformed delegation transaction.
• The glitch was exploited by an ADA staking pool operator using AI-generated code.
• The U.S. Federal Bureau of Investigation (FBI) is investigating the incident.
• The chain split had a modest impact on the price of ADA.

Cardano Network Split Details

On Friday, the Cardano network faced a significant disruption when it experienced a temporary chain split. The cause of this disruption was a “malformed” delegation transaction – transactions to delegate ADA (ADA) to a staking pool, which are valid on the protocol level but can cause code malfunctions that affect network functionality. This “malformed” transaction exploited an old code bug in the underlying software library used by the Cardano blockchain, resulting in a network partition due to a disagreement in how nodes processed the transaction, according to an incident report from Cardano ecosystem organization Intersect.

Developer Response and Potential Repercussions

Staking pool operators were directed to download the latest version of the node software to fix the issue and reconstitute the split chain into a single blockchain history. However, the split has led to concerns about orphaned transactions and potential ADA double-spends that have caused economic damage to some users. The exploit was caused by an ADA staking pool operator known as Homer J, who used AI-generated code to push the transaction and has accepted responsibility for causing the network partition.

FBI Investigation Initiated

The temporary split caused a debate within the Cardano community, with some arguing that Homer J’s actions helped expose critical bugs and others, like Cardano founder Charles Hoskinson, calling it an attack on the Cardano network. According to Hoskinson, the US Federal Bureau of Investigation (FBI) was contacted and is investigating the incident. In a separate video statement, Hoskinson said: “This kicked a hornet's nest, and in many jurisdictions, this is a felony — a very serious one. It's tampering with and damaging a digital network. Maybe it's shits and giggles, and they think it's just fun and games — ‘oh, look, we kicked Charles's toy.’ But these things impact the lives, money, and commerce of millions of people. It's like trying to shut down an economy and conduct a cyberattack on a nation-state.”

Limited Impact on ADA Price

A chain split or any network disruptions are typically significant events for blockchain protocols that negatively impact the price of their native tokens. However, the price of ADA recorded modest declines during and after the incident, dropping from $0.44 on Friday to about $0.40 at the time of this writing. The modest price decline came amid a broad crypto market downturn that began in October when a historic flash crash led to a $20 billion cascade of crypto liquidations — the largest single-day liquidation in crypto history.

Community Reactions

One user commented in response to Friday’s incident that no one noticed Cardano’s network partition “because nobody uses it.” Despite the reported low usage, the ongoing FBI investigation highlights the potential risks and severe consequences of manipulating cryptocurrency networks.