CRYPTO MOVERS AND PRICES
For the most part, crypto was marginally lower to unchanged this morning. Solana (SOL) continues to outperform and is up 8%.
Crypto Story of the Day
On Friday, Ethereum suffered a chain split due to a bug in the Geth Client seemingly being exploited by an unknown actor. ETH saw new intraday highs following the critical event.
The chain split— a situation where, due to an error, 2 versions of a blockchain exist for a period of time— was created via the exploit of a bug in the Geth (Go Ethereum) Client software. Geth is an open source software which facilitates interaction with Ethereum and allows users to run nodes. Geth is used by 74.7% of Ethereum node operators.
On August 18, Go Ethereum announced that it would be releasing software updates aimed at addressing “a high severity security issue” and urged users to “make any necessary preparations to upgrade to the upcoming release.” The exact “attack vector” that the fix was aiming to address was not revealed when the upgrade was made public on August 24.
On Friday, 3 days after the upgrade was released, an unknown actor triggered a transaction that, relying on the bug, caused the Ethereum blockchain to split into 2. It isn’t clear if the actor triggered the bug with the intention of causing the chain split. The bug affected those Geth implementations which hadn’t upgraded their software with the code including the fix, i.e. the older Geth implementations split from the Ethereum blockchain.
According to Tim Beiko, an Ethereum core developer, “[t]he bug is serious in that it caused a chain split, but the effects on the Ethereum mainnet were negligible given that the vast majority of clients had upgraded.” The event is virtually identical to a chain split involving Geth in November 2020. During that event, Geth operators who weren’t using the latest software were split from the network when a transaction triggered a bug.
According to a post-mortem of the November chain split, “not all node operators were running recent releases and yesterday morning a transaction managed to trigger the consensus issue, splitting old Geth releases off from the rest of the network.” In the most recent chain split, because “most miners” had updated to the Geth version containing the fix before the bug was triggered, the “correct chain” remained longer than the chain caused by the bug, according to Ethereum Foundation Security Lead Martin Swende.
The chain split didn’t cause any major exchanges to suspend deposits or withdrawals of ETH or ERC-20 tokens. However, Andre Cronje, the founder of DeFi venue yearn.finance, suggested users avoid making transactions unless they’re “sure [they] are submitting to latest [G]eth.”
Historically, crypto investors have often overlooked technical red flags. For example, last summer, the market largely ignored a spate of successful 51% attacks on the Ethereum Class network. Similarly, investors have largely ignored Friday’s event. The chain split would’ve created the opportunity for further exploits such as double spends— including for NFTs— and could’ve potentially created unknown vulnerabilities for DeFi venues and other smart contracts holding USD billions worth of assets.
The event also highlights the difficulty involved in maintaining consensus across a complex network amid frequent software updates. At the end of the day, it’s conceivable that other critical bugs, such as the one that the Geth update aimed to fix, remain undiscovered by Ethereum developers, posing an active risk to users.