Hydra is the two-layer scalability solution for Cardano. Prior to version 0.13.0, it is possible for a malicious head initializer to extract one or more PTs for the head they are initializing due to incorrect data validation logic in the head token minting policy which then results in an flawed check for burning the head ST in the `initial` validator. This is possible because it is not checked in `HeadTokens.hs` that the datums of the outputs at the `initial` validator are equal to the real head ID, and it is also not checked in the `off-chain code`. During the `Initial` state of the protocol, if the malicious initializer removes a PT from the Hydra scripts it becomes impossible for any other participant to reclaim any funds they have attempted to commit into the head, as to do so the Abort transaction must burn all the PTs for the head, but they cannot burn the PT which the attacker controls and so cannot satisfy this requirement. That means the initializer can lock the other partic…

Hydra is the layer-two scalability solution for Cardano. Prior to version 0.13.0, the specification states that the contestation period in the datum of the UTxO at the head validator must stay unchanged as the state progresses from Open to Closed (Close transaction), but no such check appears to be performed in the `checkClose` function of the head validator. This would allow a malicious participant to modify the contestation deadline of the head to either allow them to fanout the head without giving another participant the chance to contest, or prevent any participant from ever redistributing the funds locked in the head via a fan-out. Version 0.13.0 contains a patch for this issue.

Hydra is the layer-two scalability solution for Cardano. Users of the Hydra head protocol send the UTxOs they wish to commit into the Hydra head first to the `commit` validator, where they remain until they are either collected into the `head` validator or the protocol initialisation is aborted and the value in the committed UTxOs is returned to the users who committed them. Prior to version 0.12.0, the `commit` validator contains a flawed check when the `ViaAbort` redeemer is used, which allows any user to spend any UTxO which is at the validator arbitrarily, meaning an attacker can steal the funds that users are trying to commit into the head validator. The intended behavior is that the funds must be returned to the user which committed the funds and can only be performed by a participant of the head. The `initial` validator also is similarly affected as the same flawed check is performed for the `ViaAbort` redeemer. Due to this issue, an attacker can steal any funds that user's try…

Hydra is the layer-two scalability solution for Cardano. Prior to version 0.13.0, not signing and verifying `$\mathsf{cid}$` allows an attacker (which must be a participant of this head) to use a snapshot from an old head instance with the same participants to close the head or contest the state with it. This can lead to an incorrect distribution of value (= value extraction attack; hard, but possible) or prevent the head to finalize because the value available is not consistent with the closed utxo state (= denial of service; easy). A patch is planned for version 0.13.0. As a workaround, rotate keys between heads so not to re-use keys and not result in the same multi-signature participants.