Ethereum Weathers Bug That Underlines Possible Blockchain Risks

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(Bloomberg) — Ethereum has weathered a bug that split the world’s most-used blockchain and opened up the risk of counterfeit Ether tokens.

Outdated software last week caused the fork in the digital ledger, which is popular for blockchain-based financial services and transactions in online collectibles. Users minimized the damage by rapidly updating a key program and the deviant fork should wither, said Joseph Lubin, founder and CEO of Consensys Systems, and a co-founder of Ethereum. 

a man standing in front of a stage: Mining the World’s Second-most-valuable Cryptocurrency at Evobits I.T SRL© Bloomberg Mining the World’s Second-most-valuable Cryptocurrency at Evobits I.T SRL

“This chain fork opened up a single minor vulnerability: a greater likelihood of perpetrating a double-spend and getting the money out of the system before it is corrected naturally by the protocol,” Lubin said in an email Sunday. He said there had been an attempt to exploit the bug, but added that the issue is rapidly being solved by people making the needed updates.

The episode is the latest to highlight potential weaknesses in cryptocurrencies. Just this month PolyNetwork was subject to a $610 million hack that was likely the biggest ever in DeFi, although it said it recovered all the funds. Japanese crypto exchange Liquid also suffered a hack estimated to be around $90 million, and Bitcoin SV faced a so-called 51% attack on its blockchain.

One coder for the software at the center of the Ethereum bug said that at one point it was a “really close shave.”

Ether rose to back above $3,200 in Asia on Monday and was trading at around $3,165 at 2:10 pm Hong Kong time. It slid while the bug fix was taking place, dropping from around $3,341 on Aug. 23 to as low as $3,056 on Aug. 26. 

More than half of Ethereum nodes may have been running with the bug at one point, according to a report from The Block on Friday. The Block Research also identified an address that exploited the bug. Several pools, including Binance, appeared to have been mining on the wrong version, according to a tweet Friday from Ethereum core developer Tim Beiko.

“This just underlines how all major public blockchains are non-linear, meaning they are run by an open-source community that needs to be majority aligned in principle and technically to ensure seamless chain performance,” said Konstantin Richter, founder and chief executive officer of Blockdaemon, in an email Saturday. “Since there isn’t a central entity, these things happen and are the price of decentralization.”   

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