A 300 Million Dollar Parity Error

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Episode Transcript

Speaker 1 (00:03):
What would you do if you made a mistake that
costs people three hundred million dollars. I'm Jonathan Strickland, and
this is Tech Stuff Daily. On Tuesday, November seven, a
company called Parody had to break some pretty bad news
to its customers. The company developed a digital wallet meant

(00:26):
to be the secure storage location for a digital currency
called ether. Ether is used by an app platform called Ethereum.
Parodies news was that an effort to patch an identified
vulnerability in their digital wallet solution led to a new vulnerability,
one that was accidentally exploited. The vulnerability was a real

(00:49):
doozy that allowed a single user to become the owner
of every multi signature digital wallet on the Ethereum platform.
This would be like waking up to discover the wallet
of every person in the world had mysteriously shown up
in your house. You'd have some explaining to do. In
this case, the user is DevOps one nine nine. Clearly

(01:11):
that's a handle. The Guardian, which reported on this story,
didn't reveal the person's real name. It's pretty clear that
whomever is behind the DevOps one nine nine handle didn't
intend for this to happen. What did happen was that
this developer, apparently by accident, turned the parody wallet library
contract into an actual multi signature wallet and then became

(01:32):
the owner of all the wallets. Then this developer, perhaps
in a panic, when the realization dawned that this had
all happened, tried to undo this mistake by deleting the code. Unfortunately,
it didn't reverse the mistake. Instead, it froze all the
funds in the system. The means to unfreeze the funds
are located inside the code that was deleted. In other words,

(01:55):
the developer did the equivalent of accidentally stealing all the
wallets in the world, which appeared in this developer's enormous vault.
Then the developer tried to fix the problem by destroying
the vault. However, what happened was the vault door has
now been permanently stuck shut and the money inside it
is effectively lost. There is a potential, though problematic, fixed
to this problem that would involve creating what is called

(02:17):
a hard fork. To understand what this means, we need
to think about block chains for a second. A block
chain is a record of transactions that everyone in the
system has access to, rather than a centralized database of transactions.
The blockchain is distributed across the entire system. It's an
integral component of the system itself. Everyone can view it

(02:38):
and thus authenticate the transactions that have already happened. Cryptocurrencies
like bitcoin use the blockchain to verify not just a transaction,
but also to release more of the currency into circulation
and a process called mining. Ideally, a blockchain is a
steady series of blocks of data representing all the transactions
that have happened with the cryptocurrency, going all the way

(02:58):
back to the earliest pens. A hard fork is when
administrators of a system make the decision to backtrack and
branch off of an earlier block to start from that
point forward. This is sort of like playing a video
game in which you can save your progress at any time.
Let's say you're playing the game and you realize you've
made a choice that's leading you down a path you'd

(03:19):
rather not take. You can't backtrack, so instead you restore
a save file you made from before that fateful choice.
You now can choose a different path and continue playing
the game. In a way, that's what parody might be
able to do with the ether that's been locked away.
There's no method to reverse the mistake Devop one nine
nine made, but the company could backtrack a bit and

(03:42):
make a hard fork earlier in the chain to bypass
the mistake entirely. This could mean having to turn the
clock back to a point that invalidates some transactions, which
is problematic. A few wallet owners might find themselves short
of some currency or in possession of a bit more
lucre than they should have, and it's non decision for
the company alone. It would require a fifty one agreement

(04:05):
among the currency's users. If that happens, parity will be
able to effectively dial back the clock. One thing that
can't be undone is the blow to cryptocurrencies reputation. Digital
currency in general has been the subject of much debate.
There have been a few notable problems, including hackers stealing
funds through various security vulnerabilities in different digital wallet platforms.

(04:26):
So why use a cryptocurrency at all? For one thing,
the decentralized structure means the currency isn't dependent upon any
government or financial institution. In theory, this isolates the currency
from the fluctuations that could affect national currencies. However, in practice,
the value of currencies like Bitcoin has been inconsistent. Cryptocurrency

(04:47):
and blockchain strategies aren't going anywhere, but it's likely that
there will be more scrutiny directed towards both the technology
itself and the supporting tech like digital wallets in the future.
This isn't a bad thing and may eventually lead to
an implementation that is more secure, allowing digital currencies the
chance to become more of a mainstream technology. If you'd
like to learn more about cryptocurrency and all other things tech,

(05:09):
subscribe to the tech Stuff podcast. We published the show
on Wednesdays and Fridays and cover tech topics in much
greater detail. I'll see you again soon.