5 years after the DAO crisis and the Ethereum hard fork

Vulnerability of a smart contract in a private DAO fund The first is the leak of cryptocurrency Worth tens of millions of dollars (billions of dollars as of today), and then to Hard fork Ethereum, the second largest blockchain network. You can find numerous articles investigating these events, including a wiki page. Although the purpose here is to draw conclusions, let us review what happened five years ago.

DAO is a startup company that operates an investment fund in Ether (Ethereum) And run as a smart contract on Ethereum. DAO is a proper name, the founder decided to use it as a reference to general concepts Decentralized autonomous organization, Or DAO. The fund claimed from the very beginning that they operate under the terms and conditions of its smart contract, which is nothing more than program code deployed on the blockchain. Their website does not contain any legal terms and conditions, but states that machine code is superior to any human readable text to explain this code.

Despite this, DAO is notorious for a loophole in its program that allows unknown users to use up a third of their funds.Loss worth 3.6 million Ether at the time Approximately 60 million US dollars, Or about 7.3 billion US dollars as of today. In view of the negative impact of Ethereum and the huge public pressure (the fund has more than 10,000 investors), the network leader decided to introduce a retrospective hard fork of its blockchain.

As a result of the fork, the funds in The DAO were transferred to a recovery address, as if the leak never happened. Therefore, users of the fund can request to recover their investment. There are opponents of the hard fork, so the opponents continue to use the original Ethereum blockchain, calling it Ethereum Classic (and many more). It uses a real blockchain to operate, and until now, Unknown has run out of funds.

A major debate revolved around this question: Is this theft at all?The U.S. Securities and Exchange Commission (SEC) investigated the case and Publish Their report. Although they did not make it the main issue, their report included the words “stealing” and “attacker”, which seemed to be qualified by default. To this day, no criminal investigation has been conducted, or at least the authorities have failed to properly resolve it.

Interestingly, after this behavior, the unknown (let us call them more neutral, not “attackers”) Publish An anonymous letter stating that they did not consider this to be illegal or any violation of the law or terms, citing the notorious statement on the prevalence of smart contracts on the DAO website. In fact, many commentators support the conclusion that Unknown did not make a mistake, because they took advantage of the legitimate features of the code, which exist objectively, and are even known to developers as some investigations further show.

Takeaway

No matter who did it, there are still many unresolved issues in this case, which are much broader than they seem, and much more difficult, if not speculation. These problems must be solved by philosophers, governments, and the blockchain community in order to move forward.

This case shows the world how fragile smart contracts can be, which makes the whole concept of “code is law” questioned (American legal scholar Larry Lessig Coming up This concept predates the invention of blockchain). It also shows how traceability in the blockchain occurs when most people support the blockchain, and despite the widely cited characteristics of the blockchain, it remains the same.

If historical alternative forks are possible, what’s the point? Are all the advantages of technology multiplied by zero? If this is not a defect but an advantage, should we learn how to work correctly? Going a step further, what if we encounter new phenomena in law and governance? Should the similarities be drawn to find the answer?

• Parallel to governance and lawStatutory laws passed in a democratic way (for example, by elected legislators) reflect the consensus of the majority. Usually, a few people must obey. They cannot break the law. If the code is the law, and the blockchain is the “regulation” for formulating and implementing this law in the form of smart contracts, then what is a hard fork? Is it disobedience? Not too possible. Blockchain traceability and hard forks are always a possible choice. A hard fork is a legal way (from a code point of view). If the ledger is changed or other unwanted changes occur, the minority can protect their interests and be separated from the majority. Hard forks and retrospectives are not illegal or malicious behaviors-they are normal in this technology.
• Business parallelEthereum itself can be thought of as a business, that is, miners create and verify blocks and earn income. If so, how could the business fall apart? A department cannot be separated from the company just because of the will of such a department. However, this may happen based on the decision of shareholders or authorities (such as courts). Usually in a company, the functions of governance and production are different, such as shareholders and factories. So who is the miner: the authority or the producer?
• Parallel to criminal law and justiceThere are opposing opinions as to whether the unknown person has committed a crime or legally exploited the possibility of not being declared in the code. DAO has never introduced terms and conditions in human language, and stated that smart contracts define these terms. Therefore, there is no formal contract in the traditional sense, so we can define breach of contract. Any human language that describes the code will be someone’s interpretation. Those who did not think it was a crime emphasized that “no one has issued a trespass notice.” The poor design of smart contracts cannot protect funds. Users can decide to take action on their own, and there is no legal prohibition. If there is no sign of private property, people will not be punished for drinking in the creek. Therefore, contract law and private law do not protect it. Interestingly, the SEC used the words “attacker” and “stealing” in their report, but further government reports did not reveal any criminal investigations.
• Parallel to mob law. If this is a crime, what is a hard fork? Is this mob law? Stealing “return” is not a legal way of justice and property return. In civilized society, it is also classified as a crime. The police, prosecutors, courts and bailiffs were set up for this. Is it a new blockchain justice phenomenon based on a specific form of digital democracy?
• Parallel to anarchy. If this is neither a crime nor a just act, then what is it? Perhaps this is a pure form of market competition, without authority and state power.Then, there is a word that describes this and that as anarchy, which can be definition As “a state of society that is freely formed without authority or management,” or in this case, encryption anarchy.

All these issues need to be further explored. Doing so will ensure better public policies for blockchain technology and better strategies for future DAOs.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.