IOTA wallet vulnerability exposed, 1.6 million Euros stolen, mainnet temporarily shut down

On February 13th, the IOTA network experienced a shutdown as the IOTA Foundation claimed that tokens worth $1.6 million were stolen. The development team later discovered vulnerabilities in their own "Trinity Wallet." As of the time of writing, the IOTA network status page still shows that the mainnet is unable to operate.

• IOTA Trinity Wallet Hacked, $1.6 Million Stolen
• Crypto Community Criticizes IOTA for Over-Centralization

Mainnet Paused, Coordinator Shut Down

According to the IOTA official status page, the incident originated from multiple user complaints of theft, prompting the IOTA Foundation to announce that all resources have been dedicated to investigating the matter. Currently, around 10 victims have reported theft from using the Trinity wallet. The IOTA network status page remains offline with no on-chain transactions in the past few days.

The Foundation mentioned that external cybersecurity experts have joined the investigation, indicating vulnerabilities in the Trinity wallet but no violations in the core on-chain protocol. As a precaution, the Coordinator in the network has been shut down until the cause is identified.

IOTA stated on Twitter that they are collaborating with law enforcement and cybersecurity experts to investigate the theft. To protect users, the Coordinator has been temporarily paused, and users are advised not to use the Trinity wallet until further notice.

Crypto Community Criticizes Over-Centralization

Following the incident, many cryptocurrency enthusiasts criticized IOTA for arbitrarily shutting down the Coordinator, citing it as a representation of centralization. Twitter user Eric Wall sarcastically commented on the IOTA Foundation:

"Just so you know, while the IOTA Foundation can shut down the system at will, it doesn't mean IOTA is centralized. In IOTA Foundation's own words, it's actually 100% decentralized."

Another user illustrated the severity of the incident with a practical example:

This is very bad news, IOTA powers all Bosch systems, imagine what would happen if all Volkswagen cars (one of IOTA's partners) couldn't function due to the network being shut down.

This is very bad news, what's going to happen to all the Bosch control system that IOTA is powering ! Think of all the Volkswagon vehicles that can no longer operate because the entire network is shut down.

This is worse than Y2k. I'm going into my bunker to prep for doomsday. https://t.co/DK4VB3Oipv

— Kay Kurokawa (@kaykurokawa) February 13, 2020

As of now, the IOTA Foundation stated that a comprehensive and transparent report will be provided once the incident is fully resolved. Currently, no information is being shared to prevent hackers from gaining further insights. The IOTA token price has been slightly affected, dropping approximately 9.6% on the day of the incident, currently priced at $0.31.

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