Ethereum Security and the DAO Solidity Attack

The basics of Ethereum are described in the Gavin Wood paper. A list of keywords in Solidity are described in this file from its source, which includes “address”, “contract”, “event”, “mapping” and “wei” ( 1 Eth= 10^18 Wei). This list does not include “gas”, which is a mechanism described in Wood’s paper to combat abuse. Interestingly the paper says “The first example of utilising the proof-of-work as a strong economic signal to secure a currency was by Vishnumurthy et al. [2003].” , aka the Karma paper.

The karma paper talks about solving a cryptographic puzzle to join the network and be assigned a bank set: ” the node certifies that it completed this computation by encrypting challenges provided by its bank-set nodes with its private key. Thus each node is assigned an id beyond its immediate control, and acquires a public-private key pair that can be used in later stages of the protocol without having to rely on a public-key infrastructure”.

The DAO attack had 3 components, a hacker, a malicious contract and a vulnerable contract. The malicious contract is used to withdraw funds from the vulnerable contract so that it does not get a chance to decrement its balance. Oddly enough the gas mechanism which is supposed to limit computation did not kick in to stop this repeated remittance.

A few weeks before the DAO attack someone had pointed out to me that security of solidity was a bit of an open problem. My feeling was contracts should be layered above the value exchange mechanism, not built into it. Bitcoin based protocols with the simpler OP_RETURN semantics appeared more solid. Later around October’16 at an Ethereum meetup, Fred Ehrsam made the comment that most new projects would be using Ethereum instead of bitcoin. But Bitcoin meetups had more real-world use cases being discussed. The technical limitations exist, which are being addressed by forks such as SegWit2x this November.  Today saw a number of interesting proposals with Ethereum, including Dharma, DataWaller and BloomIDs. Security would be a continuing  concern with the expanding scope of such projects.

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