DAO / ETH Hack And Market Crash Friday 17.06.2016 (UPDATED!)

If you’re trading cryptocurrencies on sites like Poloniex and you already woke  up (or didn’t sleep yet for the Americas people) – you know that Ethereum and DAO basically crashed today:

etch / dao market crash due to hack on june 17th 2016

The reason is that DAO has been hacked and the hacker has been draining Ethereum with, so far, over 2M ETH stolen. Ironically, on June 9 Peter Vessens outlined the exact way to exploit the system in this blog post, so it looks like after doing his research for 7 days the hacker attacked last night.

What is kinda cool is that you can see the attacker’s wallet while he does the draining – here it is.

The top Ethereum developers are already working on counter-measures, and they recommend all Ethereum users to basically spam (“DDOS”) the chain with requests to paralyze it – this is the only way to block the attacker right now.

Here’s the code that Stephen Tual suggests running:

Please use this in your Ethereum client to spam the chain:

for (var i = 0; i < 100; i++) { eth.sendTransaction({from: eth.accounts[4], gas: 2300000, gasPrice: web3.toWei(20, ‘shannon’), data: ‘0x5b620186a05a131560135760016020526000565b600080601f600039601f565b6000f3’}) }

Hopefully this will get under control soon.

Please keep in mind that the hack primarily concerns DAO – and Ethereum is crashing due to an indirect effect. Chances are, Ethereum will get back to where it was before, so it might be a good idea* to buy some once it’s low.

* Not investment advice, do your own thinking.


Once again this shows us the fragility and the beauty of cryptocurrencies. The perpetrator’s wallet is public, everyone is watching and everyone can take part in the prevention – if they spam the network good enough that no sockets are left for the thief. He/she will also have to dump the stolen ETH somewhere, and it’ll be interesting to see how and where she manages to withdraw or stash all the coin.

And a gentle reminder: if you are trading, don’t keep all eggs in one basket! This DAO hack will probably bring about more fluctuation to the exchanges, so diversify your portfolio if you haven’t yet!


10 AM UTC Update:

Looks like the Ethereum project is seriously after restoring the status quo, here’s their latest tweet urging exchanges to pause ETH/DAO trading:

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The tweet sounds a bit naive though and is against the nature of cryptocurrencies, free market and the the rest of the things we love so much. Yeah at least it’s a polite request, not an order.

Let’s see how it plays out though!


10.30 UTC Update

$53,000,000 folks. Just saying.


11.20 UTC Update

Ethereum has released an official statement on Reddit – the developer community is going to introduce a soft fork without any rollbacks. The fork will lead to all the hacker’s transactions being invalid. Read more here.

Turns out that the attacker has been channeling Ethereum into a child DAO and he won’t be able to withdraw it in the next 27 days. Seems like that gives Ethereum developers enough time to rectify the situation.

If you are trading cryptocurrencies this might be the most important signal in their blog post for you:

This is an issue that affects the DAO specifically; Ethereum itself is perfectly safe.

It seems like ETH price will be going back up so take a look at the exchanges for possible purchases while it’s low.


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18.10 UTC Update

No more news from the devs, except for that old Reddit thread that gets filled with people warning Ethereum against hard forking and reversing the fraudulent transactions (which would basically mean ETH is not that free and decentralized as it’s advertised to be).

What really sucks though is one of our favorite cryptocurrency exchanges, Poloniex, can’t handle all the post-hack traffic. A lot of money is lost here – including Poloniex’ fees they’re not getting!


Poloniex back up, unsurprisingly ETH is falling even lower now that the US people are trading – it’s at 14 USDT now vs 21 USDT pre-hack. Oh well.




So,

Main takeaways for the moneymakers, not touching the “world-changing” tech aspects:

  • New cryptocurrencies can and will get hacked, dumped, crashed etc. Do not put all your life savings into them hoping for profit. Instead go for small scalping and stay lean.
  • Follow news and social media actors that are on the ball. Proper information fast = money. Sign up to our mailing list to stay updated on these things!

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