The data is being sold on a Tor dark market website called TheRealDeal by a user named peace_of_mind who also sold 167 million user records stolen from LinkedIn. Recently he also posted offers for 360 million accounts allegedly stolen from MySpace and 40 million from adult dating website Fling.com.
According to Tumblr's security note on May 12, attackers obtained user email addresses with salted and hashed passwords in early 2013, before the company was acquired by Yahoo.
Security researcher Troy Hunt obtained a copy of the data and uploaded it to Have I been pwned, a website that he maintains and which lets users check if they were affected by known data breaches. According to him, the email addresses are accompanied by salted SHA1 password hashes.
Hashing is a one-way operation that generates unique, verifiable cryptographic representations of a string called hashes. Hashes are useful for validating and storing passwords in databases, because in case of theft attackers shouldn't theoretically be able to convert them back into passwords.
However, some old hashing algorithms like MD5 and SHA1 are vulnerable to various cracking techniques. This happened in the LinkedIn breach, where the password hashes were generated with vanilla SHA1, allowing researchers to crack over 80 percent of them.
Fortunately, in Tumblr's case, the hashes are also "salted," which means that a random bit of text was added to the passwords before they were hashed. This making cracking much less practical, as long as the salts themselves are not compromised.
Even so, users shouldn't count on that and should change their passwords as soon as possible. They can verify if they've been affected by searching for their email address in the HaveIBeenPwned.com database.
If they've reused their Tumblr password on other websites, users should change it on those websites as well. They should also review the activity on those accounts and their log-in history for services that offer this feature.
It's worth keeping in mind that even if it's only surfacing in the public domain now, this breach dates back to 2013 and three years is a long time for attackers to profit from stolen data.