User Accidentally Steals $300m in Cryptocurrency then Destroys it

Unlike most cryptocurrency hacks the money wasn’t deliberately taken, it was effectively destroyed by accident.

Over $300m of cryptocurrency was lost after a series of bugs in a popular digital wallet service. The bugs led one inquisitive developer to mistakenly take control of and then lock up the funds. But, unlike most cryptocurrency hacks the money wasn’t deliberately taken. It was effectively destroyed by accident.

The lost currency was in the form of Ether, a tradable currency that fuels the Ethereum distributed app platform. The digital multi-signature wallets were built by a developer called Parity and what makes them unique is that they require more than one user to enter their key before funds can be transferred.

Parity revealed that it had inadvertently left a flaw in its systems. This occurred while developers were fixing a bug which let hackers steal $32m from numerous multi-signature wallets in July. The system flaw allowed one user to become the sole owner of every single multi-signature wallet. The user had apparently triggered the flaw by accident.

When the user realized what had happened, they immediately attempted to undo the damage. But rather than returning the money the user simply locked all the funds in those multi-signature wallets permanently, with no way to access them. It also means that currently no funds can be moved out of the multi-signature wallets. What it all means is that the user inadvertently stole hundreds of wallets then set them on fire.

Some of the Ether users are pushing for a “hard fork” of Ethereum. This would mean that the damage would effectively be undone. In doing so they will ask 51% of the currency’s users to agree that it never happened. This option will require a change to the code that controls Ethereum. The change would need to be adopted by the majority of the user base.

One of the risks in doing so is that some of the community may refuse to accept the change which will result in a parallel split of the users. This type of damage control is not unheard of. Two years ago a hack of the Ethereum app resulted in $150m being stolen. The “hard fork” was successful then, but the money stolen represented a much larger portion of the entire Ethereum market than the $300m lost to Parity.

Parity has maintained that it is unable to confirm the actual amount lost and that the $300m figure is “purely speculative”. It also stated that the currency is not lost but rather frozen with no-one able to unfreeze the funds. Ethereum has rapidly become the second most important cryptocurrency, after Bitcoin, with its price increasing more than 2,500% over the past year. One token of Ether is now worth a little over $285, up from $8 in January.

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Ali Raza

Ali Raza

Ali is a freelance journalist, having 5 years of experience in web journalism and marketing. He contributes to various online publications. With a master degree, now he combines his passions for writing about internet security, cryptocurrency, and technology. When he is not working, he loves traveling and playing games.

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