Overview
In Monero we've discovered and patched a critical bug that affects all CryptoNote-based cryptocurrencies, and allows for the creation of an unlimited number of coins in a way that is undetectable to an observer unless they know about the fatal flaw and can search for it.
We patched it quite some time ago, and confirmed that the Monero blockchain had NEVER been exploited using this, but until the hard fork that we had a few weeks ago we were unsure as to whether or not the entire network had updated.
Once we were certain that the network had updated, we notified all active and affected CryptoNote coins, including CryptoNote themselves, Bytecoin, Forknote, Boolberry, DashCoin, and DigitalNote.
Note that, at this time, only Monero, Aeon, Boolberry, and Forknote have updated. We have given the other currencies as much time as possible, but cannot hold back disclosure any longer.
We strongly caution against anyone using, trading, exchanging, or running services involving the following currencies affected by this issue: Bytecoin, DashCoin, DigitalNote
Problem
The so-called "key image" as used in CryptoNote coins utilising elliptic curve ed25519 can be modified in a special way, allowing double-spends. This effectively allows someone to create an infinite amount of coins in a way that is impossible to detect without knowing about the exploit and explicitly writing code to check for it.
Mitigation
Several options exist for mitigation. The simplest, least invasive is noted below.
To mitigate, check key images for correctness by multiplying by the curve order l. Check that the result is the identity element.
Hexadecimal values of each:
Identity element = "0100000000000000000000000000000000000000000000000000000000000000"
Curve order (little endian) = "edd3f55c1a631258d69cf7a2def9de1400000000000000000000000000000010"
For each transaction key image, check ((key image * curve order) == (identity element)); reject transaction if false.
https://getmonero.org/2017/05/17/disclosure-of-a-major-bug-in-cryptonote-based-currencies.html