Parity Wallet Failure

Amy Wan discusses the Parity Wallet failure here and describes a new SDK that she is rolling out that will offer insurance against similar failures by future smart contracts.  One important point is her list of potential failure points for smart contracts, a set of points I agree with:

  • smart contracts may contain coding errors (and many developers write code using a fail fast and iterate mentality)
  • smart contracts may contain vulnerabilities easily exploited by hackers
  • smart contracts may not accurately reflect the intent of parties
  • contracting parties may change their mind and wish to amend, modify, or terminate the contract due to misrepresentation, mistake, duress, impossibility, or a change in circumstance
  • external data sources, such as other contracts or oracles may provide incorrect data

There are many ways to minimize exposure here. Code audits are a must, particularly for significant, multi-use libraries. Building in failsafes – like Amy’s SDK or other tools – is also prudent. And linking to multiple external oracles with sanity checking for the inputs is likewise necessary.

Author: Michael O'Connor

Michael O'Connor is an attorney in Quinn Emanuel's Washington, DC office. Prior to joining the firm, Michael clerked for the Hon. D. Brooks Smith of the U.S. Court of Appeals for the Third Circuit and worked for several years at another major international law firm. He has dual degrees in Computer Science and Biology from Penn State University. Michael's practice includes intellectual property litigation, antitrust litigation, and data security and privacy. Michael advises clients on legal planning for data breaches, their obligations for safe handling of personally identifiable information, and the legal implications from emerging technologies like Bitcoin, Ethereum, and the blockchain. He has applied his technical training to patent cases involving semiconductor design, systems programming, and mobile device architecture. He has worked on multiple cases at the intersection of patent and antitrust law. Michael represents clients in cases before federal courts throughout the country, as well as before the International Trade Commission.