Cardano suffers temporary chain split from code bug, but ADA hangs on

The Cardano network suffered a temporary chain split on Friday, due to a “malformed” delegation transaction, transactions to delegate ADA (ADA) to a staking pool, which are valid on the protocol level but can cause code malfunctions that affect network functionality.

This “malformed” transaction exploited an old code bug in the underlying software library used by the Cardano blockchain, resulting in a network partition due to a disagreement in how nodes processed the transaction, according to an incident report from Cardano ecosystem organization Intersect.

Staking pool operators were directed to download the latest version of the node software to fix the issue and reconstitute the split chain into a single blockchain history. 

However, the split has led to concerns about orphaned transactions and potential ADA double-spends that have caused economic damage to some users.

The exploit was caused by an ADA staking pool operator known as Homer J, who used AI-generated code to push the transaction and has accepted responsibility for causing the network partition. 

The temporary split caused a debate within the Cardano community, with some arguing that Homer J’s actions helped expose critical bugs and others, like Cardano founder Charles Hoskinson, calling it an attack on the Cardano network.

Related: 5-year Cardano hodler loses 90% of $6.9M ADA in bungled swap

Charles Hoskinson says the FBI is now investigating, but markets barely noticed the split

The US Federal Bureau of Investigation (FBI) was contacted and is investigating the incident, according to Hoskinson. In a separate video statement, Hoskinson said:

“This kicked a hornet’s nest, and in many jurisdictions, this is a felony — a very serious one. It’s tampering with and damaging a digital network. Maybe it’s shits and giggles, and they think it’s just fun and games — ‘oh, look, we kicked Charles’s toy.’ 

But these things impact the lives, money, and commerce of millions of people. It’s like trying to shut down an economy and conduct a cyberattack on a nation-state,” he continued. 

A chain split or any network disruptions are typically significant events for blockchain protocols that negatively impact the price of their native tokens.

However, the price of ADA recorded modest declines during and after the incident, dropping from $0.44 on Friday to about $0.40 at the time of this writing.

The modest price decline came amid a broad crypto market downturn that began in October when a historic flash crash led to a $20 billion cascade of crypto liquidations — the largest single-day liquidation in crypto history.

No one noticed Cardano’s network partition, “because nobody uses it,” one user said in response to Friday’s incident.

Magazine: Charles Hoskinson, Cardano and Ethereum – for the record