Hackers Steal Over 200 Ethereum In Smart Contract Breach

Key Points:

  • A new protocol that lets people create and share digital objects on Ethereum, Ethscriptions, experienced a major hack on its main marketplace.
  • The theft affected about 123 individual addresses and resulted in the loss of around 202 ethscriptions.
  • The protocol’s creator claimed responsibility for the failure, and the Ethscriptions.com marketplace will be relaunched once necessary changes are made to the protocol itself.
According to its creator, a new protocol which enables people to create and share digital objects on Ethereum and makes use of transaction “calldata” to write non-financial data to the network’s blockchain has encountered a major setback.
Hackers Steal Over 200 Ethereum in Smart Contract Breach

Ethscriptions, which was launched last month by Tom Lehman, co-founder and former CEO of Genius.com, is a novel method to create Ethereum assets. Although the Ethscriptions’ protocol itself and other applications that tap the technology haven’t been compromised, a significant number of Ethscriptions listed on Ethscriptions.com have been stolen, as per Lehman’s tweet on Friday.

He said, “About 123 individual addresses lost a total of about 202 ethscriptions in this exploit. Any young protocol will have bumpy landings, but this is definitely not what I meant.” It is uncertain how much was lost in terms of value connected to the exploit. Nevertheless, according to data from NFT marketplace OpenSea, some inscriptions have sold for as much as 5 Ethereum, which equates to around $9,600 in the past month.

Lehman lamented the theft of Ethscription #56 as “brutal,” pointing to the rarity often ascribed to earlier artifacts. Moreover, the exploit has a particular sting because it was meant to serve as an example that other marketplaces building out support for Ethscriptions could lean on. “The purpose of the marketplace was basically to help show other people how to create marketplaces and help build an ecosystem,” he said. “Unfortunately, we fell on our face in that area.”

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Lehman took responsibility for the failure and explained that the exploit could be traced to a smart contract that he and Indelible Labs co-founder Michael Hirsch created. A snippet of code allowed people to withdraw Ethscriptions that they didn’t own from the marketplace. “Part of the challenge with this new protocol is that you save a bunch of money from limiting the use of smart contract storage, but then you have to be more strategic surrounding how you use contracts in cases like marketplaces,” he said. “You have to figure out a way to either give smart contracts information or make it so smart contracts don’t need that information.”

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Lehman said that the Ethscriptions.com marketplace would be relaunched once necessary changes are made to the protocol itself, and he has been in touch with many of those impacted by the exploit. He praised them as “the earliest adopters” of the Ethscriptions protocol on Twitter.

Ethscriptions are distinct compared to traditional NFTs, stored in transaction-level data as opposed to being tokens issued on Ethereum by smart contracts, like in the case of the ERC-721 token standard. According to a Dune Analytics dashboard, around 474,000 Ethscriptions have been created so far. The protocol’s emergence follows Ordinals’ popularity, which is used for creating NFT-like assets on Bitcoin and has led to a new wave of experimentation with crypto’s oldest coin. Lehman drew attention to the exploit on July 14, and a disclaimer about the impacted state of the marketplace remains on Ethscriptions.com days later. A warning on the website reads, “There is an issue with the marketplace contract! Withdraw your Ethscriptions and do not create new listings!”

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