WEBVTT - A 300 Million Dollar Parity Error

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<v Speaker 1>What would you do if you made a mistake that

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<v Speaker 1>costs people three hundred million dollars. I'm Jonathan Strickland, and

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<v Speaker 1>this is Tech Stuff Daily. On Tuesday, November seven, a

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<v Speaker 1>company called Parody had to break some pretty bad news

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<v Speaker 1>to its customers. The company developed a digital wallet meant

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<v Speaker 1>to be the secure storage location for a digital currency

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<v Speaker 1>called ether. Ether is used by an app platform called Ethereum.

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<v Speaker 1>Parodies news was that an effort to patch an identified

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<v Speaker 1>vulnerability in their digital wallet solution led to a new vulnerability,

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<v Speaker 1>one that was accidentally exploited. The vulnerability was a real

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<v Speaker 1>doozy that allowed a single user to become the owner

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<v Speaker 1>of every multi signature digital wallet on the Ethereum platform.

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<v Speaker 1>This would be like waking up to discover the wallet

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<v Speaker 1>of every person in the world had mysteriously shown up

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<v Speaker 1>in your house. You'd have some explaining to do. In

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<v Speaker 1>this case, the user is DevOps one nine nine. Clearly

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<v Speaker 1>that's a handle. The Guardian, which reported on this story,

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<v Speaker 1>didn't reveal the person's real name. It's pretty clear that

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<v Speaker 1>whomever is behind the DevOps one nine nine handle didn't

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<v Speaker 1>intend for this to happen. What did happen was that

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<v Speaker 1>this developer, apparently by accident, turned the parody wallet library

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<v Speaker 1>contract into an actual multi signature wallet and then became

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<v Speaker 1>the owner of all the wallets. Then this developer, perhaps

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<v Speaker 1>in a panic, when the realization dawned that this had

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<v Speaker 1>all happened, tried to undo this mistake by deleting the code. Unfortunately,

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<v Speaker 1>it didn't reverse the mistake. Instead, it froze all the

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<v Speaker 1>funds in the system. The means to unfreeze the funds

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<v Speaker 1>are located inside the code that was deleted. In other words,

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<v Speaker 1>the developer did the equivalent of accidentally stealing all the

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<v Speaker 1>wallets in the world, which appeared in this developer's enormous vault.

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<v Speaker 1>Then the developer tried to fix the problem by destroying

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<v Speaker 1>the vault. However, what happened was the vault door has

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<v Speaker 1>now been permanently stuck shut and the money inside it

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<v Speaker 1>is effectively lost. There is a potential, though problematic, fixed

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<v Speaker 1>to this problem that would involve creating what is called

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<v Speaker 1>a hard fork. To understand what this means, we need

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<v Speaker 1>to think about block chains for a second. A block

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<v Speaker 1>chain is a record of transactions that everyone in the

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<v Speaker 1>system has access to, rather than a centralized database of transactions.

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<v Speaker 1>The blockchain is distributed across the entire system. It's an

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<v Speaker 1>integral component of the system itself. Everyone can view it

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<v Speaker 1>and thus authenticate the transactions that have already happened. Cryptocurrencies

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<v Speaker 1>like bitcoin use the blockchain to verify not just a transaction,

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<v Speaker 1>but also to release more of the currency into circulation

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<v Speaker 1>and a process called mining. Ideally, a blockchain is a

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<v Speaker 1>steady series of blocks of data representing all the transactions

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<v Speaker 1>that have happened with the cryptocurrency, going all the way

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<v Speaker 1>back to the earliest pens. A hard fork is when

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<v Speaker 1>administrators of a system make the decision to backtrack and

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<v Speaker 1>branch off of an earlier block to start from that

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<v Speaker 1>point forward. This is sort of like playing a video

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<v Speaker 1>game in which you can save your progress at any time.

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<v Speaker 1>Let's say you're playing the game and you realize you've

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<v Speaker 1>made a choice that's leading you down a path you'd

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<v Speaker 1>rather not take. You can't backtrack, so instead you restore

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<v Speaker 1>a save file you made from before that fateful choice.

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<v Speaker 1>You now can choose a different path and continue playing

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<v Speaker 1>the game. In a way, that's what parody might be

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<v Speaker 1>able to do with the ether that's been locked away.

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<v Speaker 1>There's no method to reverse the mistake Devop one nine

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<v Speaker 1>nine made, but the company could backtrack a bit and

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<v Speaker 1>make a hard fork earlier in the chain to bypass

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<v Speaker 1>the mistake entirely. This could mean having to turn the

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<v Speaker 1>clock back to a point that invalidates some transactions, which

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<v Speaker 1>is problematic. A few wallet owners might find themselves short

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<v Speaker 1>of some currency or in possession of a bit more

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<v Speaker 1>lucre than they should have, and it's non decision for

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<v Speaker 1>the company alone. It would require a fifty one agreement

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<v Speaker 1>among the currency's users. If that happens, parity will be

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<v Speaker 1>able to effectively dial back the clock. One thing that

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<v Speaker 1>can't be undone is the blow to cryptocurrencies reputation. Digital

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<v Speaker 1>currency in general has been the subject of much debate.

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<v Speaker 1>There have been a few notable problems, including hackers stealing

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<v Speaker 1>funds through various security vulnerabilities in different digital wallet platforms.

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<v Speaker 1>So why use a cryptocurrency at all? For one thing,

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<v Speaker 1>the decentralized structure means the currency isn't dependent upon any

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<v Speaker 1>government or financial institution. In theory, this isolates the currency

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<v Speaker 1>from the fluctuations that could affect national currencies. However, in practice,

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<v Speaker 1>the value of currencies like Bitcoin has been inconsistent. Cryptocurrency

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<v Speaker 1>and blockchain strategies aren't going anywhere, but it's likely that

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<v Speaker 1>there will be more scrutiny directed towards both the technology

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<v Speaker 1>itself and the supporting tech like digital wallets in the future.

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<v Speaker 1>This isn't a bad thing and may eventually lead to

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<v Speaker 1>an implementation that is more secure, allowing digital currencies the

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<v Speaker 1>chance to become more of a mainstream technology. If you'd

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<v Speaker 1>like to learn more about cryptocurrency and all other things tech,

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<v Speaker 1>subscribe to the tech Stuff podcast. We published the show

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<v Speaker 1>on Wednesdays and Fridays and cover tech topics in much

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<v Speaker 1>greater detail. I'll see you again soon.