Blockchain Security Issues and their Impact on the Global Capital Markets

Capital Markets Industry – Sutherland Global Services

By Christopher Rigg, Armstrong Wolfe Industry Advisor, Sutherland Global

February 13, 2022

Introduction

In a recent podcast interview Vitalik Buterin, the founder of Ethereum, described his experience trying to liquidate and donate a large chunk of the cryptocurrency called Shiba Inu that he was given by its founders. The experience Buterin portrayed sounded like a spy novel. He had stored the tokens in a cold wallet, which means that the cryptographic hash code representing his ownership of the tokens was not stored anywhere where it could be accessed on the internet. Buterin took the hash code, essentially an 80 digit number, and divided it into two numbers that if added would result in the correct key. He stored one of the values on a laptop in his home in Canada and the other on a piece of paper that he carried around at all times. To access the tokens in the wallet while Buterin was traveling in the United States, and unable to return to Canada due to the pandemic, he had to call his family, on a burner phone of course, and ask them to read out the stored number. He then purchased a new laptop from a local Target store, connected it to the internet, and entered the sum of the two numbers into an interface on the distributed crypto-asset exchange app known as UniSwap, which allowed him to trade the Shiba Inu tokens for Ethereum tokens, ETH, which could then be donated or traded for US dollars. This may seem extreme but the estimated value of the tokens in his cold wallet was over 1 billion US dollars. He expressed how intensely stressful the experience was for him because any errors in the process could result in a material loss of value.

 

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