A Decentralised Autonomous Organisation Too Big To Fail?
After the much reported fundraise of over US$150M worth of Ether a few weeks ago to start TheDAO (the largest crowdfunded venture fund to date, based on Ethereum Blockchain), an entire ecosystem of decentralised autonomous ambitions were challenged last Friday. An attack on TheDAO sent US$60M worth of Ether to the account of an unknown hacker, exploiting a vulnerability in the way smart contracts distribute resources.
There are currently over 52 proposals being reviewed for the right course of action, the most favoured one is in adopting a fork that would allow to recover the funds. It is now up to the miners to decide whether they will follow by implementing new code or reject the proposal and have US$60M lost.
TheDAO hack exposes the tension between the smart contract/blockchain believers, who are keen to operate outside the national legal systems, think the code was bad, a big lesson was learned and it is impossible to change the code otherwise the smart contract ideal would be betrayed, and the humans who didn’t test the code before the fundraise, might have been swayed by good PR and have lost their investments.
This is a fascinating social and technological experiment with some important implications on how smart contracts (and probably blockchains) will be treated and perceived in the future.
The idea of smart contracts was to build immutable, unstoppable, and irrefutable systems that can run decentralised organisations. Given that TheDAO code was vulnerable and didn’t undergo a proper audit, one wonders if consumers got to be protected by government regulations? What kind of legal system and court could judge on this case: changing the code afterwards is breaking the law vs. recovering millions of funds?
Also, can key people still influence the direction of a decentralised community by suggesting code? How would that affect future Ethereum applications that might be used by government and corporates?
To conclude, the Ethereum community goes through a big learning lesson and gets grounded as smart contracts have to get better.