Date
19 November 2017
There are no immediate reports of lost or stolen tokens, but a sizable amount of ethereum is expected to be at risk from the vulnerability. Photo: Bloomberg
There are no immediate reports of lost or stolen tokens, but a sizable amount of ethereum is expected to be at risk from the vulnerability. Photo: Bloomberg

Parity wallet vulnerability freezes US$278 million of ethereum

The price of ethereum tokens suddenly plunged Tuesday when Parity Technologies, the company behind the popular cryptocurrency wallet, said it detected a critical vulnerability that led to hundreds of millions of dollars of the cryptocurrency being potentially frozen, TechCrunch reports.

Researchers familiar with the field suggest that more than one million ETH (US$278 million) are frozen due to the event.

The price of ethereum dropped on news of the vulnerability, falling from US$305 to US$291, a two-week low. At 12:52 p.m. Wednesday, Hong Kong time, it was trading at US$297.30.

It is the second setback to be discovered following the original Parity breach in July that led to US$30 million of ether (ETH) being stolen. While the company patched that bug, another issue was still present in the code that allowed for the latest event to happen.

According to a company statement, the issue affects the “multi-sig” digital wallets that were deployed after July 20. Initial coin offerings (ICO) that were held since then may be impacted.

Multi-sig wallet – short for multiple signatures – is a technology that requires more than one key to initiate and broadcast transactions, which is popular with cryptocurrency startups and other collective groups. It is also a popular way of storing cryptocurrency raised in ICOs.

According to the company’s blog post, an unidentified user accidentally locked up recently created digital wallets within Parity by deleting the code library required to use those wallets, which in turn rendered all multi-sig contracts unusable since their logic (any state-modifying function) was inside the library.

There are no immediate reports of lost or stolen tokens, but a sizable amount of ethereum is expected to be at risk. According to data from EtherNodes.org, Parity constitutes roughly 20 percent of the entire ethereum network.

One high-profile company impacted is Polkadot, a project that raised over US$140 million in a token sale. Polkadot confirmed its wallets have been frozen and 60 percent of its cryptocurrency raised is potentially affected, according to TechCrunch.

Parity has not shared any official totals, but it said on Twitter that it believes that “the funds are frozen and can’t be moved anywhere”, adding that projections for the amount of ETH impacted were “speculative”.

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