Ethereum's Pectra Upgrade Fails on Sepolia Testnet, Postponed Indefinitely

Ethereum's recent Pectra upgrade on the Sepolia testnet encountered significant issues due to an unknown attacker exploiting an edge case. The upgrade, which rolled out at 7:29 am on March 5, quickly ran into problems as error messages and empty blocks began to appear on the geth node. The root cause of the issue was identified as a deposit contract triggering the wrong type of event—a transfer event instead of a deposit event.

Initially, a fix was deployed to address the problem. However, an unknown user exploited an overlooked edge case by sending a zero-token transfer to the deposit address, which reactivated the error. This led to the mining of more empty blocks, causing further disruptions. The Ethereum development team quickly realized that the transaction originated from a new account recently funded by the faucet, indicating that the attacker was exploiting a loophole in the ERC-20 standard, which allows zero-token transfers.

To mitigate the issue, the development team implemented a private fix that filtered out all transactions interacting with the deposit contract. This fix was deployed to a few controlled DevOps nodes to restore normal block mining. By 2 pm, all nodes had been updated with the fix, and the unknown user's transaction was successfully mined. The team emphasized that they never lost finalization during the incident, and the issue was isolated to Sepolia due to the use of a token-gated deposit contract instead of the mainnet deposit contract.

This incident is not the first time the Pectra upgrade has encountered issues. Previously, the upgrade was tested on the Holesky testnet on February 26, where it also faced problems. As a result, the developers have decided to postpone the Pectra upgrade until further testing can be conducted to ensure a smoother rollout. The Pectra fork follows the network’s Dencun upgrade, which aimed to reduce transaction fees for layer-2 networks and enhance the economics of Ethereum rollups. The Dencun hard fork was successfully implemented on March 13, 2024.