Accusations from North Korean developers shake Cosmos ecosystem

A recently released onchain investigation claims that part of the Cosmos ecosystem may have been developed by North Korean agents and caught the attention of the FBI in 2023.

Part of Cosmos’ Liquid Staking Module (LSM) may have been built by North Korean developers, according to Cosmos ecosystem developer Jacob Gadikian, who shared the research in an Oct. 16 post. Gadikian stated, “It’s not about their geography or ethnicity. The people who built the LSM are the most skilled and prolific crypto thieves in the world.”

Following the revelation, concerns arose among investors, fearing that some developers could be from the infamous Lazarus group, a cybercrime group with ties to the North Korean government responsible for some of the biggest crypto hacks, including the $600 million Ronin operate the bridge.

Cosmos was previously unaware of the North Korean contribution to the LSM, according to Cosmos co-founder Ethan Buchman, who wrote in an Oct. 18 post, “Congratulations to the teams coming together to quickly set up these audits. We are also looking at ways to completely remove the dependency on LSM. None of us were aware of North Korea’s work on LSM, but we worked together to deal with it.”

The fact that malicious North Korean actors may be involved in the Cosmos LSM code could provide hidden vulnerabilities, such as a secret backdoor into the ecosystem, said Melody Chan, research director at Redecentralise, a nonprofit organization that advocates for the sustainable development of decentralized finance (DeFi).

While the possible North Korean connection is concerning, it does not necessarily mean the developers were connected to the Lazarus Group, according to Anndy Lian, author and intergovernmental blockchain expert. Lian emphasized the need for security audits to address any vulnerabilities.

Two parallel audits will be conducted to address any vulnerabilities. The first from OtterSec and Binary Builders is scheduled for next week, and the second from Zellic is scheduled for mid-November announced core Cosmos contributor Informal Systems.

Following the reports, Informal Systems proposed a “phased removal” of the Cosmos LSM, which would be replaced by a new framework. The new framework would separate governance from block production, allowing users to delegate block production to a single validator, while assigning governance votes to different entities. Paragraph 1:
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