The DAO: What Dreams May Come
It hasn’t been a while since the recursive call and leakage of three million ETH from the DAO, but the events continue making their turns.
The community’s reaction towards Ethereum Foundation’s actions wasn’t very unform. The issue of possible hard fork or soft fork questioned the very foundations of decentralization. However, any decision made in a situation like that would have been subject to criticism.
Notably, criticism in the DAO’s regard swiftly covered Ethereum itself. In particular, some experts blamed Solidity, the language used to write smart contracts.
â€śEthereum truly is different from other altcoins. If I had looked into Ethereum more carefully, I might have noticed that economics was not the only subject that the Ethereum devs did not understand. They also don’t understand law and software engineering. They created a situation in which bugs would be expected to arise in an environment in which bugs are legally exploitable. That is hacker heaven,â€ť wrote researcher Daniel Krawisz.
But still, is everything that bad, and are the claimes addressed to Ethereum really justified, if the problem originates exclusively from negligence of the DAO’s developers? Let’s try to find out how can the industry learn from this crisis.
Thoroughly Planned Attack
The attack became known nearly three and a half hours after the cost of Ethereum and The DAO tokens started plunging. By mid-day, crypto community was panicking. Definitely, the attack was thoroughly planned in order to profit from Ethereum price decline. With a good leverage, The Dark DAO creators won’t need a single penny of the assets stolen from the mother DAO, as they could have made all the profits by playing short.
Ethereum Foundation, Wanxiang and ETH Price
Nearly a year ago, Ethereum Foundation announced it was bankrupt. Prior to any stable release, the community was taking pot shots at Ethereum. The real mass attention, media coverage and nice promotion came to the platform when their cryptoassets started skyrocketing this year.
However, it’s hardly news. After all, bitcoin became famous after its own to-the-moon. In late September 2015, China-based Wanxiang saved Ethereun Foundation from going bankrupt. By mid-November same year, 1 ETH was worth around $0.60.
Back then, some suggested such a powerful ally could force the token’s price to grow in mid-term, which has actually happened in a few months.
Was this a macchiavelian act performed by the Chinese investor seeking to reimburse the expenses and get profit, is a matter of speculation, and nothing more. Most importantly, Ethereum mass evangelism kicked off when the cryptocurrency started skyrocketing in February 2016. In other words, some members of the community suddenly saw a neon sign â€śEarn fast and easy hereâ€ť over Ethereum.
Ethereum founder Vitalik Buterin stressed on numerous occasions that the platform is a very risky and equally promising experiment. Current criticism addressed to Buterin and his actions regarding the recursive call originate from misunderstanding of the investment object by some ETH holders.
Moreover, Ethereum founder has sold 25% of his coins this April. He invested only 1% of his ETH in the now-notorious The DAO. That’s what sound financial planning actually looks like.
Proof Of Work Soft Fork Voting and Possible Extension of Proof-of-Work
Now, Ethereum miners face a difficult problem of whether to endorse the network’s soft forking, or not. The very soft fork isn’t that bad for the industry as the possible hard fork. The problem of whether returning money via a hard fork is legit is subject to discussion, and can hardly be solved through a compromise. It’s either yes or no, with no third option. It’s the other thing that’s interesting.
Most probably, switching to Proof-of-Stake (or Casper in Ethereum) and the end of PoW mining mightÂ be postponed from this autumn, as miner support for a soft fork or a hard fork would require some bonuses. Security of Ethereum-based projects will also become a vital issue.
What the DAO Taught Us
The attack on the DAO will remain a popular theme for discussions, and even be eligible to compete with block size debate. Now it’s way more important to memorize and realize the lessons the incedent had taught the community.
- Carefully analyze ICO’s. You should realize pretty well what and why you’re buying. Avarice will lead you to losses sooner or later. Certainly, even failed crypto projects may have an enormous speculative potential in the mid-term. If you, as an investor, are counting on it, you still shouldn’t invest more you can afford to lose.
- A release postponed is better than a code unchecked. The DAO developers didn’t expect the Spanish success of their project. However, it made it attractive both to investors and attackers. Anyway, there was nothing that could stop them from suspending the project for a while and limiting access to the main contract. They should’ve launched the main functionality only after a series of serious tests involving the community, blockchain experts and security specialists. The way it happened in real life shows astonishing negligence. As a result, reputation of some developers is nearly ruined.
- Hic sunt dracones.Â Idealism and good intentions inherent in the crypto community inebriate and distract from the real course of affairs. As new cryptocurrencies and projects appear at exponential rate, we should revisit the history of stock markets to avoid mistakes of the past.
- Emotions and panic will never help solve the problem reasonably.
Unfortunately, the DAO drama isn’t the last shock for the crypto industry. The market is rapidly developing, and mass users only start discovering it. User and investment protection won’t become default options for a long time, though there have been some attempts to protect investors. One should accept that the worst and most intriguing things are yet to come. And it’s alright.
So the best insurance against mistakes is carefulness, expert consultations, and thorough market analysis.
Subscribe to our Newsletter<
- CFTC Seeks Public Comments on Ethereum and Its Underlying Technology
- Ethereum’s Constantinople Upgrade Delayed Until 2019, Called the “Most Reasonable” Decision
- Vitalik Buterin Says ZCash’s ZK-SNARKs Can Scale Ethereum Up To 500 Tps
- Bullish Sentiment Returns to Crypto Markets as Morgan Stanley Looks into Bitcoin Trading Services
- Ethereum Plummets Below $200, Bitcoin Battles to Stay Above $6,400
- Dogecoin Soars Over 140% In Three Days as Dogethereum Smart Contracts Launch Nears
- Cboe Reportedly Close to Launching Ethereum Futures
- World’s Largest Bitcoin Mining Pool Launches Ethereum and Ethereum Classic Operation