Ethereum might be undergoing a hard fork again, and this hard fork has nothing to do with the planned Metropolis hard forks. After a Parity developer took over and deleted a Parity Wallet library smart contract, developers are now working towards finding a solution to unlock the frozen Parity Funds. In fact, Millions worth of Ether or the equivalent of 1% of the Ether in circulation is frozen and inaccessible.
We have covered the frozen Parity funds involving (only) multisig wallets in our article Ethereum Funds Freeze on Parity Multisig Wallets Explained.
Back to the possibility of an Ethereum Fork to solve the issue of the frozen Parity funds. Tight now, opinions diverge as to where the responsibility for the vulnerability lies: Is it that Ethereum and smart contracts specifically are not reliable? or is it more like an error or a negligence by Parity wallet? opinions diverge on the matter.
What it looks like is a series of smart contracts pointing to 1 single smart contract (the library that was deleted) has been taken over and deleted by a new developer. So the questions to be asked are the following:
- How can multiple smart contracts holding such crucial information have a single and fatal point of failure?
- How come other Ethereum Multisig wallets (From other wallet providers) did not or are not having a similar issue?
- How can such a library be so easily accessible even from within the company?
These are the questions Parity will probably have to answer within the next few days. Already, users are asking for the tightening of the consequences of exchanges and wallets security failures. For Parity, it is becoming concerning as this is their second software failure this year. And it is an epic failure as the scale is much larger than the DAO hack.
Solutions to retrieve the Frozen Parity Funds
In terms of solutions, it seems the developers are in the process of working on multiple proposals to fix the issue and retrieve the funds. The task is no easy one and will involve technical and political aspects related to Ethereum and the Ethereum community.
According to Coindesk, Martin Holst Swende, Ethereum Foundation’s head of security, a hard fork of the ethereum blockchain will be required to unfreeze up the funds.
From an Ethereum price perspective, the price touched an intraday high of 5%, indicating that the prospect of a hard fork is seem as a positive catalyst right now by the market.
We still believe the main thing to watch is the explanation Parity will provide to this epic fail and understanding if this is a vulnerability specific to Parity (did they fail to code the smart contract and audit it thoroughly ) or is this a vulnerability within Ethereum Smart contracts. We tend to believe it has more to do with the first scenario. Time will tell! Meanwhile, maybe Vitalik Buterin thinks the same:
More information on the planned Ethereum hard forks is available in the following articles:
- Enhanced Anonymity for Ethereum Coming, Bullish for Ethereum Price
- Ethereum Price and the Upcoming Metropolis Upgrade
- Raiden Network, Ethereum’s Powerful Version of the Lightning Network
- Ethereum after a smooth and successful Byzantium fork