When was the last time you read or heard a news story of a software crypto wallet safely protecting millions of dollars? That’s right, never. It’s only when someone has their software wallet emptied that is becomes newsworthy. Each time a digital wallet hack makes the headlines, thousands of people tell themselves they are glad they never got involved in crypto.
The Electrum wallet was supposedly vulnerable to attack for two years before it was patched. In January 2018, $400,000 worth of Stellar Lumens was stolen from Black Wallet users. In November 2017, a bug in the Parity wallet locked up $150 million of ether. Several high profile crypto influencers hit the headlines in April 2018 when their digital wallets were emptied. Remember these influencers are far more tech-savvy than the general public, so if they can be hacked, anyone can.The developer of the electrum-ltc wallet was recently asked if a bug in the software could have been responsible for one coin holder losing over $350,000 worth of litecoin. His answer was: “I don’t think this was caused by a bug, but the code is freely available for anyone to review.” Open source software can be checked by other developers, but that in itself doesn’t mean its bug-free.
Almost all software has bugs, and if that means your computer reboots with the “blue screen of death” (BSOD), it can be inconvenient, but bugs in crypto digital wallets can be life-changing for those that are affected. If hackers can gain access to computer networks at the Pentagon, which are protected by the U.S. government, you can be sure they can access many online digital wallets.
Developers need to redesign their digital wallets by setting a default limit of say $10,000 for each coin rather than the current system of unlimited funds being available to hackers. Anything above the default limit could be transferred to a hardware wallet, and if the user doesn’t have one, it could be sent to an escrow account or a charity. For coin holders in developing countries, even the loss of $10,000 could be life-changing, so the digital wallets should allow the user to set a lower personal limit.
The developer of the Litecoin Cash digital wallet stated on April 21, 2018, that they have considered imposing limits for their wallet, but that he thinks it might be better suited to the coin itself using the consensus rules. That would be a possibility, but the Litecoin Cash project has also opened a GitHub issue for users to provide feedback to implementing hard limits in their wallet.
Financial analyst, smartphone app designer, technical writer, and crypto enthusiast. Blockchain verified graduate of MOOC 9, DFIN-511: Introduction to Digital Currencies, run by the University of Nicosia.