The DAO is suffering from a major, sophisticated attack. A vulnerability in the SplitDAO() function enabled an attacker to drain ether funds from the smart contract, 3.5 million ETH have been lost at the time of writing this article.

Ethereum traded as low as $11.51 today after a market crash. The sudden loss in valuation was the result of a sophisticated attack targeting The DAO, approximately 3.5 million ether have been withdrawn from the smart contract

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The Blockchain protocol remains fully functional, the attack targeted a vulnerability in the SplitDAO() function, Stephan Tual, COO of the german startup Slock.it -the coders from the DAO framework- said:

The entire Ethereum community, including the Ethereum Foundation and experts from various companies in the field are working together to analyse and attempt to stop the attacker.

This black swan event has left traders under the waters. Ether was trading as high as $21 some hours ago. Vitalik Buterin, creator and co-founder of The Ethereum Foundation asked

exchanges to halt deposits, withdrawals and trading of ethers. Kraken answered the call and released a report indicating that they will halt ether withdrawals for the time being.

The Ethereum Foundation have reported a security incident related to an ETH leak in The DAO. This does not appear to affect Kraken but, out of an abundance of caution, and at the request of the Foundation, we have temporarily paused withdrawals in order to prevent any ether stolen from The DAO from flowing through Kraken.

Update 1: The Ethereum foundation has released a statement detailing the events of the attack, as a summary, the attacker will not be able to withdraw the stolen funds at least for 27 days. In Vitalik’s own words the proposal to fix the issue is:

The development community is proposing a soft fork, (with NO ROLLBACK; no transactions or blocks will be “reversed”).

This change will prevent the attacker from withdrawing the funds past the 27 days.

This will later be followed up by a hard fork which will give token holders the ability to recover their ether.