Submitted by jayjonah8
Currently any account can send funds to the distribution module account breaking the crisis invariant and causing a complete consensus failure resulting in no new blocks being produced.
In Cosmos based blockchains there are whats called module accounts. During development extra care has to be taken to ensure that module accounts cannot receive any funds outside of the expected rules of the state machine. If they do this can cause invariants to be broken and result in a halted network. Do to this fact the x/bank module accepts a map of addresses that are considered blocklisted from directly receiving funds through arbitrary transactions.
In the ZetaChain blockchain there are many module accounts that can properly accept funds without breaking the rules of the state machine.  The vulnerability is that the  distribution  module account can accept funds from arbitrary users, but does so in a way that breaks the state machine.
Along with causing a total consensus failure, this bug does not allow for any new blocks to be produced which results in an inability to accept new transactions and brings the chain to a complete halt.  With regard to blockchain bugs, this is among some of the worst possible scenarios that can take place in a distribution state machine. Imagine being able to bring Ethereum to a halt by simply sending 1 wei to a certain address.
The likelihood of this being exploited in the future is high since its simply a transfer of tokens from one account to another.
Cosmos Documentation related to this issue located here
zetacored tx bank send zeta13c7p3xrhd6q2rx3h235jpt8pjdwvacyw6twpax zeta1jv65s3grqf6v6jl3dp4t6c9t9rk99cd83m2fn0 100azeta --gas-prices 20azeta
The way to fix this bug is by adding the distribution module account address to the blocklisted mapping in the bank module. This will prevent arbitrary users from sending funds directly to this address. If this address is indeed suppose to hold funds it should be done in a way that does not break the state machine or cause invariants to break.
Solution described here.
lumtis (ZetaChain) confirmed
0xean (Judge) decreased severity to Medium and commented:
