Categories: CryptoNews

ShadowFork’s Smart Contract Bug Freezes $1M Worth of Ethereum

It seems Ethereum’s self-sustaining Ponzi scheme has already hit a major roadblock. Even though there was a lot of initial interest in this project, a few spin-offs have been created already. It seems the latest contract, known as ShadowFork, contains a major issue which prevents anyone from withdrawing funds. This also means the contract’s creator is unable to cash out any of the proceeds. It is still an honest Ponzi scheme, but few people are thrilled by this development.

PoWHCoin Spin-off Causes Major Problems

A lot of Ethereum enthusiasts will agree that using smart contracts for Ponzi schemes is not exactly a great PR move. While it does highlight the possibilities of smart contract technology, it also attracts a lot of negative attention. PoWHCoin is an honest and transparent smart contract-based Ponzi scheme that has attracted a lot of interest. Its unique setup has allowed a lot of people to make some money along the way.

This inspired PoWHCoin’s creator to come up with a slightly different twist on the smart contract-based Ponzi scheme. Known as ShadowFork, this new scheme would pay extra dividends to investors. It is a very daring business model, but one that could actually work out quite well. Unfortunately, things hardly ever go as planned, especially when it comes to people compiling smart contracts without the necessary coding knowledge to recognize and address major errors.

When people started investing in this new Ethereum-based Ponzi, it quickly became apparent that cashing out would become a big problem. That’s because there is a major flaw in the smart contract which throws an exception. As a result, any attempt to remove funds from this smart contract is deemed impossible and will create a continuous “loop”. The creator of this contract shrugged off this development as “everyone is stuck HODLING now.” It’s a bit cheeky, but people knew that something like this could eventually happen.

More specifically, the Ether collected by this smart contract will remain stuck in limbo forever – that is, unless the Ethereum developers decide to roll back the blockchain again and remove any transactions associated with this contract. It seems highly unlikely history will repeat itself in this regard, though. This incident also teaches everyone a valuable lesson: never invest in a project without knowing what exactly its smart contract code does. If anyone had audited this contract, this issue would have been prevented quite easily.

According to the latest statistics, the ShadowFork smart contract holds over US$928,000 worth of Ether. This money is lost forever, and new transactions are still coming in for some reason. There is no way to fix this problem, and everyone should avoid sending money to this particular address. Unless someone comes up with a solution, the one-line coding error will spell the end of PoWHCoin’s second Ponzi scheme. It’s an unfortunate turn of events, even though it’s not entirely unexpected.

All of this once again shows the need for Ethereum smart contract auditing. It’s good that everyone in the world can set up their own contracts, but without proper knowledge, things can go awry very quickly. ShadowFork shows just how dangerous this technology can be in the hands of inexperienced coders looking to build financial “tools”. Although a Ponzi scheme should always be ignored, it seems a lot of people invested in this contract regardless. It’s an expensive lesson learned, for all intents and purposes.

JP Buntinx

JP Buntinx is a FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he aims to achieve the same level of respect in the FinTech sector.

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