CVE-2022-31111 is a medium-severity vulnerability affecting paritytech's Frontier, which is the Ethereum compatibility layer built on top of the Substrate blockchain framework. The vulnerability arises from an incorrect implementation of truncation logic when converting balances between the Ethereum Virtual Machine (EVM) balance type and the native Substrate balance type. Specifically, the truncation process that should ensure consistent representation of token amounts between these two systems is flawed, resulting in discrepancies between the apparent EVM transfer value and the actual amount transferred on the Substrate layer. This inconsistency can lead to incorrect internal EVM state balances, although the native Substrate balance states and the node itself remain unaffected. The root cause is classified under CWE-670, indicating an always-incorrect control flow implementation, which suggests that the truncation logic consistently fails under all conditions rather than intermittently. The vulnerability was addressed in Frontier's master branch with commit fed5e0a9577c10bea021721e8c2c5c378e16bf66 and in the polkadot-v0.9.22 branch with commit e3e427fa2e5d1200a784679f8015d4774cedc934. Until these patches are applied, it is recommended to temporarily pause EVM execution by configuring a Substrate CallFilter to disable calls to the pallet-evm and pallet-ethereum modules, preventing exploitation of the flawed truncation logic. No known exploits have been reported in the wild, and the vulnerability impacts only the internal EVM state, not the underlying Substrate balances or node operations.

For European organizations utilizing blockchain infrastructure based on Substrate with Frontier as the Ethereum compatibility layer, this vulnerability could lead to inconsistencies in token accounting within the EVM environment. This may cause financial discrepancies, undermine trust in smart contract executions, and potentially disrupt decentralized finance (DeFi) applications or other blockchain-based services relying on accurate token transfers. Although the native Substrate balances remain intact, the divergence in EVM internal states could be exploited to manipulate perceived token holdings or transfer amounts within EVM-based applications, potentially leading to financial loss or erroneous contract behavior. Organizations operating validator nodes, blockchain service providers, or enterprises integrating Substrate-based blockchains with Ethereum compatibility in Europe could face operational risks and reputational damage if the vulnerability is exploited. The impact is particularly relevant for entities involved in financial services, supply chain management, or digital asset custody that depend on precise token accounting and cross-chain interoperability.

Immediate mitigation involves temporarily pausing EVM execution by configuring a Substrate CallFilter to disable the pallet-evm and pallet-ethereum calls, effectively preventing any EVM transactions until the patch can be applied. Organizations should plan and execute an emergency upgrade to the patched versions of Frontier, specifically incorporating the fixes from commits fed5e0a9577c10bea021721e8c2c5c378e16bf66 (master branch) or e3e427fa2e5d1200a784679f8015d4774cedc934 (polkadot-v0.9.22 branch). It is critical to verify the integrity and authenticity of the patch before deployment. Additionally, after patching, thorough reconciliation of EVM internal balances with Substrate balances should be performed to detect and correct any discrepancies caused prior to the fix. Monitoring and alerting should be enhanced around EVM transaction anomalies and balance inconsistencies. For organizations running multi-node or multi-chain environments, coordinated patching and testing are essential to avoid network partition or consensus issues. Finally, reviewing and strengthening testing procedures for balance conversions and control flow implementations in blockchain modules can prevent similar issues in the future.