Ethereum Client Bug Freezes User Funds as Fallout Remains Uncertain

An unknown amount of user funds on the ethereum network have been frozen due to a code issue with the Parity wallet software.

The security vulnerability which activated the freeze was found yesterday in ethereum's second most popular client by a developer going by the name "devopps199," who reported it on GitHub.

The vulnerability affects any Parity wallet deployed after July 20 that uses the company's "multi-signature" functionality. Under a multi-signature arrangement, more than one key is required to initiate and broadcast transactions.

So far, it's unclear how many of these wallets were deployed in that time frame and what amount of ether is currently stuck. According to data from EtherNodes.org, Parity constitutes roughly 20 percent of the network – and there's early indications that as much as $100 million worth of ether (if not more) may be inaccessible at this time.

This vulnerability follows another Parity issue from earlier this year, where wallets were hacked and $30 million in ether was stolen.

While the company patched that bug, another issue was still present in the code that allowed for today's exploit to happen. Speaking to CoinDesk, devopps said he is new to smart contracts and was following the logic of the former hack when he stumbled on the current problem.

What remains not as simple, however, is the process of figuring out how to retrieve the frozen funds.

Some developers have speculated that a hard fork is the only way to fix the problem. But as hard forks are a controversial upgrading mechanism – particularly in the context of ethereum - some in the community are already "refusing" to execute such an upgrade.

In the meantime, Parity has issued a statement warning users to avoid creating new multi-signature wallets, announcing:

"We​ ​are​ ​advising​ ​users​ ​not​ ​to​ ​deploy​ ​any​ ​further​ ​multi-sig​ ​wallets​ ​until the​ ​issue​ ​has​ ​been​ ​resolved​, ​and​ ​to​ ​not​ ​send​ ​any​ ​ether​ ​to​ ​wallets​ ​that have​ ​been​ ​deployed​ ​and​ ​are​ ​in​ ​use​ ​already.​"

"Parity Technologies would like to assure everyone that we are analyzing the situation, and we will release an update with further details shortly," the statement ends.

CoinDesk will continue monitoring this developing story.

Security lock image via Shutterstock