Distributed Ledger Technologies – the magic is in the name, in that one of the greatest strengths of DLTs are their distributed nature and the resilience this provides.
Unfortunately, earlier this week the cryptocurrency Ether, reliant on similar fundamental DLT principles as the infamous Bitcoin, suffered from an exploited vulnerability that caused nearly $300 million worth of Ether to become permanently locked up and unusable.
As Jennifer Aniston might say, here comes the science bit:
An earlier vulnerability in an Ether “multi-signature wallet” library called Parity had theoretically been addressed in July this year. Unfortunately it seems that this fix contained another vulnerability that allowed a user known as “devops199” to “accidentally” trigger a function that caused the “smart contract” governing the protocols of this wallet to switch from a multi-signature wallet into a regular wallet, and made him or her the owner. Further steps taken by devops199 then instantly locked out all of the other users from their funds stored in the wallet.
It is estimated that Parity wallets make up roughly 20% of the whole of the hugely popular Ethereum ecosystem.
If you’re not intimately familiar with the workings of Ethereum and Ether, this may all sound like mumbo jumbo, but practically it meant that a user exploited a bug to grant himself nearly $300 million of other users’ crypto-cash.
In this instance, recourse was available and the governing bodies are taking steps to help repatriate the lost funds.
The UK Parliament is currently reviewing the risks and opportunities in using “Algorithms in Decision Making”. Written evidence has been submitted and there is the opportunity to comment before a written paper is prepared.
Grant Thornton has invested in infrastructure, labs and experts focused on the ethics and legal and practical concerns that flow from the use of DLT and cryptocurrencies. It seems inevitable that as we imbue autonomous systems with the ability to programmatically transact and take custody of financial instruments, mistakes will happen.
Mistakes happen in the world of real cash too.
But if your high street bank loses your $300 million, would you feel confident if the proposed resolution was a “hard fork” in their network operations to try to address it?
Smart contracts and DLTs are enormously useful, valuable and efficient. But the humans behind them are, still, fallible.
We very much regret that yesterday’s incident has caused a great deal of stress and confusion amongst our users and the community as a whole, especially with all the speculation surrounding the issue. We continue to investigate the situation and are exploring all possible implications and solutions. Blockchain and related technologies are a vanguard area of computer science. Our mission remains to build software to power the decentralised web.