Bitcoin's Largest Competitor Hacked: Over $59 Million "Ethers" Stolen In Ongoing Attack

Tyler Durden's picture

One month ago, Fred Ehrsam, co-founder of Coinbase in a sweeping, 2,500-word blog post, took aim at what he called a "stagnant" bitcoin community that he characterized as being outperformed by innovators working on the Ethereum network. In the post, Ehrsam sought to position Ethereum as a possible competitor to bitcoin, indicating his belief that the competing protocol could "blow past bitcoin entirely" (perhaps he was merely peeved at the lack of commission fees Coinbase was generating). In his post, Eshram said: "There is nothing that bitcoin can do which Ethereum can’t. While Ethereum is less battle tested, it is moving faster, has better leadership and has more developer mindshare. First mover advantage is challenging to overcome, but at current pace, it’s conceivable."

Also, as Coindesk reported recently, those close to the project were beginning to see The DAO as Ethereum’s "flagship application", one that they believe could hold the key to ensuring a lasting, favorable impression for Ethereum's technology, or scar its reputation, with some comparing the DAO as the possible Ether equivalent of bitcoin's once largest and now bankrupt exchange, Mt Gox.

As of this morning, however, it is decidedly the latter, because it turns out there was something else that bitcoin's biggest emerging competitor could do: get hacked.

As Cryptcoinnews reports, Ethereum co-founder Vitalik Buterin has asked digital currency exchanges to “pause” ether and activity on the decentralized autonomous organization, or DAO, activity following a hack of the DAO smart contract address. As a reminder Ethereum is the blockchain platform that enabled the DAO's creation.

The DAO is currently being drained of ethers in a still-ongoing breach (as of this morning) to the unknown attacker’s ETH address. The ongoing hack and possible theft, deemed as an “attack” on the DAO by Vitalik Buterin, has the co-founder of Ethereum issue a plea seeking digital currency exchanges to pause ether (ETH) and DAO transactions.

In a post on the Ethereum subreddit, Buterin wrote:

<DAO ATTACK> Exchanges please pause ETH and DAO trading, deposits and withdrawals until further notice. More info will be forthcoming ASAP.

The same message was also relayed via Ethereum’s social media account on Twitter.

Griff Green, spokesman for slockit, the creators of the Dao, stated on the DAO slack channel:

“The DAO is being attacked. It has been going on for 3-4 hours, it is draining ETH at a rapid rate. This is not a drill.

Amusingly, the attacker’s ETH address is still accumulating Ethereum’s token currency, with a balance of 3,559,374 ethers, currently valued at $59.05 million USD.

An interesting note from Etherium's self-description:

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference

That may need to be revised soon.

As a result, the price of Ethereum took a drastic dive this morning as news of the hack spread. Millions of ether are moving to an unkown address with some suggesting that it may be a recursive split hack. As shown in the chart below, the value of Ether has plummeted following the breach, losing over 20% of its value.

 

Ironically, Stephan Tual founder of Ethereum startup Slock.it which created the code on which The DAO is built told CoinDesk just a few days ago : "You don’t want a bad story about Ethereum. If [The DAO] were to crash, people would compare it to Mt Gox."

That's precisely what is about to happen.

As for bitcoin, it fell in earlier trading in sympathy with Etherium, tumbling 10% from multi year highs around $770 but has since promptly regained losses as BTC once again emerges as the frontrunning protocol.

Finally, all of this just goes to show that when it comes to "money", whether digital, paper, or hard, there is simply no replacement to being able to hold it in one's hand...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jun 17, 2016 8:10 AM

Central Bankers are in a panic over people's embrace of Bitcoin.  Its no surprise they would release their .gov hackers on the exchanges to create a sense of distrust.  Keep stacking

Cognitive Dissonance's picture

I am not well read up on Bitcoin, but I thought this could not happen.

Killtruck's picture

Holy shit! Let me check m-....yep, all of my shiny stuff is still there in the safe.

Whew! That was a close one, guys. 

DownWithYogaPants's picture

Did not happen to BitCoin.........so you must ask does Ethereum share code base with BitCoin....probably some at minimum

FreezeThese's picture
FreezeThese (not verified) DownWithYogaPants Jun 17, 2016 8:33 AM

This will never end

Prisoners_dilemna's picture

DIgital gold has been around 7 years, hasnt been hacked.

Bankercoin has been around 7months...  #BitcoinUsersUnaffected

SoilMyselfRotten's picture

Holy shit! Let me check m-....yep, all of my shiny stuff is still there in the safe.

 

Lucky bastard, i need to hire a deep water salvage team to see mine

SoilMyselfRotten's picture

Holy shit! Let me check m-....yep, all of my shiny stuff is still there in the safe.

 

Lucky bastard, i need to hire a deep water salvage team to see mine

Grave's picture

bitcoin has been running for over 7 years, its been peer reviewed by thousands of programmers, proven secure, robust and reliable.

shithereum (and its offshoots) on the other hand is a hyped up low quality scam, wannabe "crypto" with bad design and poor security, designed to take advantage of greedy dumbasses who missed out on the early bitcoin gains

now watch these clowns to rollback their centralized and broken shit (which is a huge no-no in crypto), its like a poor mans bankster bailout
_
bitcoin = invention of a wheel
shithereum = square wheel

dark pools of soros's picture

Exactly - I stayed away from ETH even as I saw the early momo rising because so much was based around their DAO bullshit coded contracts that just got monkey wrenched.

 

Also, Coinbase are shady pompous assholes for many reasons..  Circle has been very legit as far as USA entry points goes

ultraticum's picture

Coinbase = Circle = Bankster = Captive Regulator = Criminal

If you're going to dabble in cryptocurrencies, STAY AWAY from regulated, establishment bankster proxies like Coinbase or Circle.  The whole reason for crypto currencies is for people to control their OWN private keys to their accounts.  With Coinbase and Circle, you are trusting them with custody of your private key. 

In Bitcoin, security rests in the combination of censorship resistance (decentralization) and a math problem unsolvable by anyone other than he who holds the private key.  That private key can be generated off-line, in a way that it never touches the internet.  Its associated public key (Bitcoin address) can be given to anybody to receive funds, but funds can only be spent by the holder of the private key.

And, above all, keep loading the boat with phyzz.

dark pools of soros's picture

I mentioned entry points..  if you have any decent stash you move it to your own wallet after you get them.   The mining days are pretty much over and not many are going to do a coffee house cash trade of any real value so most people do need stable entry points.

 

Coinbase has a history of fucking over users, they pander to themselves and commerce contracts.  Circle seems to be pretty agnostic and stable.

 

that is all

 

ZorroHedge's picture

I had some small amount of ether just in case it would soar like bitcoin did in the beginning. I sold off all my ethers with a very small profit (damnit !) and converted them into bitcoin. No more Shitereum for me :-D

tmosley's picture

Yup. I warned people about Etherium. Its not something to be invested in, even if it is interesting from a decentrilized contract perspective.

Bitcoin is dying due to ever increasing transaction times. Took me a whole day to liquidate the last of mine into Dash, which is much better than Etherium as savings/transactional currency. More secure too.

dark pools of soros's picture

Fixing transaction times would be great to fuel micropayment ventures, but no one really wants to deal with the regulation of taxes for any real player to push this.  There were some really good gaming hall sites that used bitcoin and it was nirvana but even in far off countries the tax man cometh and pressure any that build momentum

 

They can't really go after the blockchain without nuking the internet, but they do put their sites on anything that prospers.

 

We'll see how Open Bazaar helps shield that

http://bravenewcoin.com/news/openbazaar-growing-fast-with-major-upgrades...

 

Grave's picture

sorry you fell for another scam, dash, which is a rebranded darkshit, badly "designed" with poor security just waiting to be hacked and all their shit drained
not to mention its hidden "accidental" instamine where "developer" gave himself huge amount of darkshit out of thin air (around 30% of entire supply)

dozens of reputable crypto experts have offered negative security reviews of this shit

same goes for tons of shitcoins like maidshit, shitple, shitsk, shitlar, shitom, shitshares, nxshit, etc, etc

as for imaginary problems with transaction times for bitcoin, pay the fucking transaction fee of few cents, joo, zero fee transactions have zero priority obviously.

Is this name taken's picture

People are generally clueless and believe what they want to. Even Andy Hoffman has jumped on the bandwagon without understanding the technical problems with bitcoin. I made a small transaction a WEEK ago (equiv to about $6) and it STILL hasn't cleared. Go read the forums and see what a giant clusterfuck it is right now and how unlikely it is to get fixed.

CPL's picture

It's that spanish dirtbag and his mIrc boiler room cronies running around hyping up another front man.  I think this is their ninth junk crypto they've released and I'm not surprised someone is shitting in their corn flakes.  They've left a lot of pissed off tech thugs in their wake.  If they aren't slapping up crypto's, they are running the cloud mining scams (double your bitcoin in 24 hours!!!  zomg!  TotallY!).  

AGAU's picture

I'm glad that you have confirmed your wealth is still safe, but what is going on here is much much bigger than individual wealth preservation, Ethereum is challenging directly the corporate/government/central banking enslavement.

Some people want to change the world some people want to preserve it the way it is. Wealth preservation is fear based so it is technically a control mechanism. Remember that scene in 2001 A Space Odyssey, where the monkey throws the bone into the air? That's where we are now. With Peer-to-Peer combined with encryption we are on the cusp of something massive, Snowden was right, encryption is the way forward.

Long metal and cryptocurrency.

 

 

Killtruck's picture

Yes, yes. indeed...seems like ethereum is challenging THE ROYAL FUCK out of the corporate/government/central banking enslavement right now. Challenging it like a command module with a cracked heat shield might challenge the atmosphere on reentry. 

I'm not saying that cryptos are worthless. I'm saying that standing in front of my server with a rifle does nothing. We don't live with solutions, just trade-offs, and physical will always have less trade-offs.  

AGAU's picture

I see risks in metals just as much as I see risks in cryptos but they are both fighting for the same side, it's about reclaiming our personal sovereignty as individuals, we want to be able to transact with anyone in the world without restriction and in the most efficient way, i.e almost completely free and fast.

If the BIS places an embargo on a country that they don't like we can't transact with that country, like Iran, but with cryptos we can bypass all that. If I lose money on cryptos fuck it, I don't care, at least I gave it a shot. I believe the developers such as Vitalik Buterin, know what's at stake, sure there will be battles won and lost  but each attack makes the cryptos stronger, worst case scenario I have metals as my core holding.

Not investing anything in crypto now is utter madness, at the very least buy a couple of BTC ffs!!!

If we're too scared to try something new how do we know we don't like it!

 

ZorroHedge's picture

Actually gold and silver do just the same. If everyone would dump fiat currency and use silver and gold, banks would be fucked also.

dark pools of soros's picture

are you going to mail your PMs to pay your utility bills?

I rather see the end of fiat, go back to PMs but use BTC to transfer payments.  Then you only have to travel to trade PM's <> BTC and be rid of fiat

 

VAD's picture

Gold, silver, lead....all still there, safe and sound

 

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Cognitive Dissonance Jun 17, 2016 8:16 AM

I believe that is why they attacked a competitor instead of Bitcoin.  Its reminiscent of attacking paper prices of precious metals rather than attempting to disrupt physical.  Bitcoin may be too secure to disrupt but the plebs will just see an attack on an electronic currency and think "oh Bitcoin", again like how most people don't really think "tablets" they just think "ipads".  A dumbed down society is a plus for manipulation

TheSecondLaw's picture

Didn't happen to bitcoin.  Happened to Ethereum.  Completely different and unrelated entities.  Do some reading.

Cognitive Dissonance's picture

I assumed they all used similar secure "technology". Bad assumption on my part.

commander gruze?'s picture

Ethereum is a completely different kind of crypto. It wasn't meant to be a currency at all, rather a "gas" for powering contracts running on Ethereum network. Nonethe less one can trade Ether. It seems that Ethereum is not really affected that much, it's the DAO contract that has been crowdfunded and gained massive publicity in weeks.

nmewn's picture

So its like a "democratic" sorta ponzi yet less #safe! ;-)

beemasters's picture

It's just a matter of time before any digital currency faces the same fate. There must be an insurance for such a loss in place.

tmosley's picture

Only if you think unbreakable contracts with no government force is a ponzi scheme.

This is more like the Railroad Bubble. People throwing money at an interesting new technology that has yet to be fully proven. Some companies will go under, others will become rich beyond the dreams of Avaris. The technology they collaborate to create will change the world for the better, that much is certain.

deimosaffair's picture

didn't happen to Ethereum, happened to theDAO (a corporation that holds 160M in ETH coins). completely different and unrelated entities. do some reading   ;)

LasVegasDave's picture

They can just print more right?

 

Or do they have to buy machinery, dig bitcoins out of the ground, then assay and refine them?

herkomilchen's picture

It is the math protecting the keys that cannot be broken.  The flaw here is not in the math, but in the implementation of the code using the keys.

If gold coins are stolen from an armored truck, it is not any fundamental failing of gold.  It is the fault of the particular armored truck company poorly managing how it is transferred.

towjamb's picture

Finally some common sense in this thread.

OpenThePodBayDoorHAL's picture

No, the flaw is that they allowed "merged mining". Had they taken Econ 101 instead of Programming they would know what the term "natural monopoly" means. So mining concentrates into fewer and fewer hands, which means very few people control the network.

nomofiat's picture

it didn't happen to bitcoin.

 

Bitcoin does one thing but it does it very well, flawless in fact.

Ethereum has to many bells and whistles. This is probably the first exploit of many.

Ethereum is also in endless supply as opposed to bitcoin.

Golden Phoenix's picture

Ethereum is not bitcoin. Bitcoin > ethereum.

1000yrdstare's picture

Physical anything!!  (make sure it's in your hands also)

RedDwarf's picture

I got my physical tulip bulbs!  They'll make a comeback any day now.

Croesus's picture

I can't wait for the day when these people realize that there is only 1 true decentralized currency...and anything else...would be uncivilized. 

E-nothing times nothing = nothing. 

Doesn't matter what kind of spin you put on it. 

swabeyjw's picture

And yet it seems the hack is neutralized from the Ehtereum community in less than 24 hrs while the Fed seems to have told the bank of bangladesh you are on your own. Perhaps, the concept of relative scale then jumps to mind. It is a brave new world. If the interplay of relative scale is of interest, try pushing the imagination on the topic of cryptocurrenties, micro-communities and sharding.

herkomilchen's picture

Yes.  If we compare how the Fed as a bureaucratic, monolithic, involuntary money supplier fixes its mistakes (cough) to how the Etherium developer community as a voluntary money supplier catering to customers fixes its mistakes, we shall see a marked difference.

AGAU's picture

I sincerely home it was central bank hackers because if that was the best they can do - it was feeble and would be very reassuring for the long term of Eth.

Troy Ounce's picture

 

 

Digital bankrun?

nmewn's picture

(Sigh)...cuz if you don't hold it in your hand you don't own it.

NoBillsOfCredit's picture

That's why you hold it on your computer or USB device.