The cryptocurrency world continues to face challenges as more individuals across the globe continue to adopt various forms of digital currencies in many ways.
The most recent development that is likely to shake up the digital currency sector is the event that led to nearly 300 million dollars of Ethereum getting locked up as a result of a coding mistake.
The funds at stake belong to multiple users who stored their Ether with Parity Technologies, which offers a program for storing digital money.
The company has a mode of operation where users are required to sign before the funds are released.
Following the loss of over $30 million worth of Ether earlier on in the year, Parity technologies adapted to having multiple users sign as a security measure.
However, the move has turned out as more consequential to the company since they have lost more user funds in the process.
It is ironic because Parity’s adoption of the multi-sig wallet was meant to enhance security and protect user funds.
Following the error, Parity released a statement through a blog post noting the flaws that ultimately led to the coding mistake that has frozen users’ Ether funds for good.
The post stated that an individual user who is known as “devops199” had initiated a command in the multi-sig that gave them full control of users’ wallets.
In the process, this user ultimately cleared multiple lines of codes. As a result, the other parties that were involved in the signing process were removed.
This consequentially meant that funds could not be moved out by whatever means possible.
To make matters worse, the user then ultimately got rid of the contract he created.
The user “devops199,” who undertakes his activities on the developer platform GitHub, appeared on Parity forums after the event to say that he is just a newbie—an indication that he knows he has screwed up things.
More so, he admitted that since it has caused damages, he is quite scared of might happen next and so, he opts to remain silent and not answer questions.
Presently, the number of affected users is not known. But since Parity stores, nearly 20 percent of all Ethers in existence, the number of affected parties is likely high.
Following the coding error, Parity clarified that it is not a hack meaning that the funds are within reach of the company.
But the only issue was how to access the millions of dollars since the erasure of codes led to locking up the Ethereum funds. However, the good news is that Parity is working to solve the issue as fast as possible.
The company advised users on the way forward to protect their funds, warning them not to transfer Ether to the affected multi-signature wallets and that they should avoid opening them altogether.
The move is meant to safeguard the Ethereum funds which are not affected by the lockup. So far, users are to follow the advice until Parity issues a directive stating that the problem has been fixed.
As expected, the value of Ethereum—which is currently the second largest form of cryptocurrency after Bitcoin—slightly dropped following the incident.
In any major event that causes money to be displaced, the value of the currency will almost always fluctuate, whether it is with paper money or digital cash.
Back in July of this year, there was a series of hacks that targeted various ICOs. At that time, the value of Ether fell from $281 on July 1 to a low of $155 on July 17 after a particular hack on CoinDash, a popular trading platform.
The essence of multi-sig wallets is to enhance security and in the event, a single person intends to run away with funds, it’s difficult to mitigate the issue because multiple parties need to give the green light.
Amid this week’s Parity crisis, Ethereum Foundation Head of Security Martin Holst Swende confirmed in an interview with CoinDesk that a hard fork on the whole Ethereum blockchain is the best way to retrieve users’ funds.
Technically, a hard fork is whereby the entire Ethereum blockchain will need to undergo an upgrade. Apparently, the upgrade is the only way to sort the issue, and it is a highly sophisticated process.
Still, Ethereum founder Vitalik Buterin explicitly stated on Twitter that he is declining to comment on a potential fix to wallet issues.
As things stand, various experts are looking into the matter to come up with a solution to fix the mess and recover the loss of millions of dollars, according to a statement by Afri Schoedon, a developer at Parity.
The involved security researchers are all looking into the issue and getting proposals. By doing so, teamwork can enable all parties to work to find the solution.
The crypto world has so many forms of currencies in existence, and this event involving Ethereum should serve as a wake-up call that all relevant stakeholders ought to work hand-in-hand to prevent future blunders that may lead to the loss of even more funds.
In some cases, it ends up having more vulnerabilities despite efforts to enhance security. And in the event the vulnerabilities are exploited, the consequences are naturally much worse, resulting in a vicious cycle.
This is evident in this week’s recent case with Ethereum.