Ethereum has the potential to change the way humans transact with one another but it is still a very young technology and it hasn’t been without its problems. While the blockchain architecture underlying the Ethereum network is secure, not all of the applications built on top of it are. Faulty code can and has made applications vulnerable to hacking and malfunctions. Here are two prime examples:
DAO was a dApp built on Ethereum that enabled crowd based venture capital. DAO token holders were given the right to vote on projects they wanted to support – if projects went on to be successful, DAO token holders would receive financial rewards. The DAO ICO received $168 million in funding. The DAO software was hosted on the Ethereum blockchain and was publically visible by all. A hacker spotted a flaw in the DAO’s code that enabled him to route $55M in ether held by the DAO into an account that he controlled. Phil Daian did a full analysis of the attack if you’re interested in reading more about it. The Ethereum team had do do something called a hard fork (something I won’t get into now) to reverse return the stolen funds.
Parity is a wallet where people store Ether. A flaw in Parity’s code let a user delete a specific line of code that was necessary for accessing funds in a Parity wallet. This led to $280 million dollars worth of ether being frozen – it hasn’t been stolen but it can’t be accessed either. Parity Technologies has proposed another hard fork to correct the issue – something that is sure to divide the Ethereum community and rattle user confidence. Santiago Palladino, a developer and researcher, went more in depth on the hack if you’re interested in reading.
Despite the world changing implications that Ethereum dApps and smart contracts have, the trouble is that any programmer can write them – if they aren’t written properly, they can behave in unintended ways and be exploited like in the above listed examples. Ethereum is still a very young network and security issues with dApps and smart contracts will have to be sorted out if its to reach its true aspirations.
