Over $200 million in Ether was hammered inside some multi-signature pockets which make use of the Parity services. This happened as a result of couple programming injuries. [1 ]
This means a few Ethereum pockets which want more than 1 signature actually have Ether (and potentially ERC-20 Ethereum-based tokens) secured inside them. The coins aren’t gone, they are just stuck.
All dependent multi-sig wallets that were deployed after 20th July functionally now look as follows:
function () payable
This means that currently no funds can be moved out of the multi-sig wallets.
We are analysing the situation and will release an update with further details shortly.
— Parity explaining the effects of this second vulnerability and its implications.
There is a good chance this problem will be fixed, but it highlights one of the risks of crypto. That is, it is software-based and open source and things can go defame.
In this case, the mishap was all just a result of a few mistakes.
- The wallets had a vulnerability (so there was a coding mistake on that end).
- A well intentioned amateur dev accidentally found the vulnerability accidentally… and in the process broke a bunch of multi-sig wallets that use Parity.
In other words, this wasn’t malicious, but it had been a few mistakes which, aims aside, led in over $200 million in frozen funds and a lot of headaches.
This can be extra ironic after all those pockets should be secure.
Crypto users shouldn’t think this is something that can just happen with Ethereum, this is a problem that the entire crypto space is up against.
Does something go defame with a popular exchange/wallet, does a hard fork like Segwit2x result in lost coins due to lack of replay security, does someone figure out how to effectively preform an attack on a major crypto? These are all real concerns.
We saw Ether lose a good bit of value after the mishap as people panicked. When MtGox lost tons of Bitcoin back in the day, people panicked and the value of BTC took a hit. Human error can be devastating in crypto… and there is no way to really predict it or totally avoid it if you want to play in the crypto space.
One good way to avoid disaster is to diversify in different coins, but as any crypto trader knows, that can be a lackluster investing plan.
Another way to avoid disaster is to hold your crypto in cold storage in different wallets (to diversify where you keep a single coin and all your coins), but that of course has its own headaches (for example, deal fees).
In words, there is no fool proof way to avoid the rollercoaster that is crypto if you want to go for the ride, but there are best practices like not keeping all your funds in a single place that would have generally avoided all the major mishaps so far.
TIP: There is no good argumentation to panic and sell-off your Ether. Especially not at a loss in my opinion. With that said, we don’t desire to supply investing information with this website. Thus do your research and create your own decisions.