DAO

DAO Ether Hacker Warns Against Hard Fork

A Twitter post from someone claiming to be the DAO attacker who has taken 3,641,694 ether has thanked the DAO for this reward, has justified the action as being consistent with the DAO smart contract terms, and is warning that any attempts to deploy a fork in Ethereum would bring legal action.

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Vitalik Buterin, Ethereum co-founder, questioned the tweet’s validity. He tweeted, “Signature looks shady at first glance: the first byte is 0x5f, which is not a standard v value by any encoding that I know about. So I would not trust this is from the attacker until I get the proper signature.”

The tweet in question stated:

“I have carefully examined the code of the DAO and decided to participate after finding the feature is rewarded with additional ether. I have made use of this feature and have rightfully claimed 3,641,694 ether, and would like to thank the DAO for this reward. It is my understanding that the DAO code contains this feature to promote decentralization and encourage the creation of ‘child DAOs.’

“I am disappointed by those who are characterizing the use of this intentional feature as ‘theft.’ I am making use of this explicitly coded feature as per the smart contract terms and my law firm has advised me that my action is fully compliant with United States criminal and tort law. For reference please review the terms of the DAO:

The terms of the DAO Creation are set forth in the smart contract code existing on the Ethereum blockchain at 0xbb9bc244d798123fde783fcclc72d3bb8c189413. Nothing in this explanation of terms or in any other document or communication say modify or add any additional obligations or guarantees beyond those set forth in the DAO’s code. Any and all explanatory terms or descriptions are merely offered for educational purposes and do not supersede or modify the express terms of the DAO’s code set forth on the blockchain; to the extent you believe there to be any conflict or discrepancy between the descriptions offered here and the functionality of the DAO’s code at 0xbb9bc244d798123fde783fcclc72d3bb8c189413, The DAO’s code controls and sets forth all the terms of the DAO creation.

A soft or hard fork would amount to seizure of my legitimate rightful ether, claimed legally through the terms of a smart contract. Such fork would permanently and irrevocably ruin all confidence in not only Ethereum but also in the field of smart contracts and blockchain technology. Many large Ethereum holders will dump their ether, and developers, researchers and companies will leave Ethereum. Make no mistake: any fork, soft or hard, will further damage Ethereum and destroy its reputation and appeal.

I reserve all rights to take any and all legal action against any accomplices of illegitimate theft, freezing, or seizure of my legitimate ether, and am actively working with my law firm. Those accomplices will be receiving cease and desist notices in the mail shortly.

I hope this event becomes a valuable learning experience for the Ethereum community and wish you all the best of luck.

Yours truly, “The Attacker.

Ethereum Responds

In what some may consider an incredible show of leadership and quick response while others may criticize as a dangerous precedent, Ethereum developers are proposing a soft-fork to be followed by a hard-fork, CCN reported.

Ethereum noted on its blog that the leaked ether is in a child DAO; even if no action is taken, the attacker will not be able to withdraw any ether at least for another 27 days (the creation window for the child DAO). This is an issue that affects the DAO specifically; Ethereum itself is perfectly safe, the blog noted.

A software fork has been proposed, (with no rollback; no transactions or blocks will be “reversed”) which will make any transactions that make any calls/callcodes/delegatecalls that reduce the balance of an account lead to the transaction (not just the call, the transaction) being invalid, starting from block 1760000 (the precise block number is subject to change up until the point the code is released), preventing the ether from being withdrawn by the attacker past the 27-day window.

This will provide time for discussion of further steps.

Ethereum noted that the attack is a recursive calling vulnerability, where an attacker called the “split” function, and then calls the split function recursively inside of the split, thereby collecting ether many times over in a single transaction.

Also read: Ethereum to hardfork, DAO to be dismantled

Funds To Be Frozen

The rules of the DAO’s code require funds to be frozen for a certain period before they can be withdrawn, according to MarketWatch. Because of this, the attacker won’t be able to touch the coins for about 27 days, Buterin said. But since the baby DAO links to the original, more coins could be stolen in the coming weeks, according to Stephan Tual, who has been involved in the creation of the DAO.

Developers, members of the Ethereum foundation, DAO architects and representatives from cryptocurrencies exchanges met in a private Skype group to formulate a plan to recover the stolen funds, according to Buterin and Jesse Powell, CEO of Kraken.

The group discussed different methods for invalidating the transactions, including a rollback that would unwind recent Ethereum transactions.

The group decided on a two-pronged approach: an update to the Ethereum software to prevent coins from being withdrawn even after the 27-day freeze has ended, followed by another to return the Ether contained in the DAO to investors, Buterin said in a statement.

What Was The Motive?

Powell suspected the attack was meant to draw attention to the security flaw. It is also possible the attackers took out a large short position in Ethereum ahead of the attack, anticipating its price to plummet on the news.

Featured image from Shutterstock.