The Germany-based startup has been attacked by hackers, who have exploited the vulnerability in the DAO software. According to estimates, the organization has lost over 3.5 million of ether, what is about 5% of all the digital currency available.
DAO, built on the Ethereum blockchain, was launched by entrepreneur Vitalik Buterin this March. It is an automated investment fund that allows its members to finance ethereum projects. In May, the organization has raised more than $150 million in ether, what significantly exceeded the founders’ expectations.
Ethereum is a decentralized platform running smart contracts that can execute themselves automatically without third party interference.
Shortly after the first news of the breach appeared on media websites, Buterin issued a message, asking cryptocurrency exchanges to pause DAO and ETH transactions.
“<DAO ATTACK> Exchanges please pause ETH and DAO trading, deposits and withdrawals until further notice. More info will be forthcoming ASAP,” Buterin posted on the Ethereum subreddit.
The stolen tokens are currently stored in a separate wallet, called “child DAO”. The sum amounts to 3,559,374 of ethers, what is estimated at more than $59 million. The core Ethereum codebase was not compromised.
The DAO vulnerability had been discovered by someone outside the core Ethereum development community and was later verified by the system users.
The DAO users offered several ways of how to delay an attack. Some proposed to spam the network to give developers more time for a better solution. The others advised to split the DAO with existing split proposals.
The nature of the organization means it has no authority that can make any changes. All the decisions are taken by the community consensus.
Buterin has proposed a soft fork that will not let the hacker to make transactions. The tokens will be freezed until July, 14, so the community has the time to find a best solution.
“Miners and mining pools should resume allowing transactions as normal, wait for the soft fork code and stand ready to download and run it if they agree with this path forward for the Ethereum ecosystem,” Buterin advised Ethereum miners in a blog post. “DAO token holders and ethereum users should sit tight and remain calm. Exchanges should feel safe in resuming trading ETH,” he added.
The hack had an immediate impact on Ether’s price, which dropped by more than 20%. Moreover, the price is likely to continue falling. Meantime, the trading volume in Ethereum demonstrated a sharp growth after the attack.