We Warned You! Ethereum Users Losing Money Devs Don’t Quite Know What to Do!

February 2nd Payments Journal ran the headline “A Positive Spin On the History of Ethereum Should Not Influence Investors.” In that article we stated this:

“My argument with the above is that the $50 million loss was not caused by scalability problems; it was caused by criminals taking advantage of a bug in the code and then a critical decision made by the developers to recover the stolen money, so the primary issue here is who actually manages the platform?

Investors should be aware that the current management will make decisions that favor some participants and have negative consequences for others.”

Now this Coindesk article titled “Ethereum Users Are Losing Money and Devs Don’t Quite Know What to Do” proves our point.  This Coindesk article states:

“As the price of its cryptocurrency ether has soared (and then corrected) in 2018, one thing has remained constant – users continue to lose money due to hacks, faulty code and human error. It’s an issue that in the past has split the platform into rivaling forces and left lingering debates – and, as recent activity on GitHub shows, tensions are escalating again.

Pumping new life into the debate is the resurgence of a chat channel formed in the wake of the loss of 513,000 ether by startup Parity last year. In particular, the forum has reignited with the release of a sketch for how fund recovery proposals could be standardized to make them easier to implement.

It’s the second major action the team have taken, after first helping arrive at possible methods to return the lost Parity funds, a proposal that was hotly rejected.

Led by developer Dan Phifer from Musiconomi (an ICO issuer that saw 16,475 ether lost in the Parity freeze) and two developers from a startup called Tap Trust, the document offers a way to make it easier for ethereum clients to implement so-called state changes, or system-wide upgrades that would require all users to upgrade their software to versions reflecting redistributed fund balances.

Yet, some vehemently disagree that such a mechanism is needed, going so far as to suggest the idea is out of line with the guiding ethos of the world’s second-largest blockchain protocol.

Already, it has been rejected by ethereum creator Vitalik Buterin, prominent developer Yoichi Hirai and communications manager Hudson Jameson – three of the six that manage the ethereum repository and thereby have the power of green-lighting changes to the platform.”

Typically shrewd investors pull out of a stock when they witness mass confusion in the upper echelons of a company or a major hacking event, witness Wynn Resorts that loss more than 18{ef8bd95f9448fca5adbd149f5d397da97f8af0ef1f28f33a703359ee151a0c82} of its stock price after revelations regarding its CEO. Or consider Equifax which lost more than 34{ef8bd95f9448fca5adbd149f5d397da97f8af0ef1f28f33a703359ee151a0c82} of its stock price after announcing it had been hacked. Investors typically pick up on these small signs and decide to take their money out and invest it more wisely.

Of course Ethereum is not traded on the stock market; instead investments are made by purchasing the Ether currency. In US Dollars, the price of Ether has dropped more than 37{ef8bd95f9448fca5adbd149f5d397da97f8af0ef1f28f33a703359ee151a0c82} since January 8th, indicating that the market does recognize problems exist. What is unclear is if a 37{ef8bd95f9448fca5adbd149f5d397da97f8af0ef1f28f33a703359ee151a0c82} drop in value properly represents all the risks?

This Coindesk article presents the many issues that are being driven as Ethereum considers how it will manage an increasing number of thefts and tries to build a policy around recovery of Ether after a hack and is worth reading to anyone interested in cryptocurrencies. Again, Mercator expects the Ethereum platform will eventually flourish, but for anyone that believes cryptocurrencies are more “secure” than fiat currencies I leave you with this quote from the article:

“Elsewhere, a leading voice behind the proposed shift, Musiconomi’s Phifer, urged the community to accept the risk of recovery when there is “no perceivable downside” and the loss impacts users “businesses and livelihoods.” He continued, saying that the problem with lost funds will likely only worsen as adoption continues to grow, putting a strain on the nascent network.

Phifer is not alone in his perspective there.

While the DAO hack and Parity freeze comprise some of the more high-profile incidents, cases of lost funds among users are said to be relatively common.

A typo in a wallet address could permanently delete funds, and attacks on insecure smart contracts are fairly frequent (litecoin creator Charlie Lee went so far as to call ethereum a “hackers’ paradise” in a conversation to CoinDesk last year).”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

Read the quoted story here

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *