If Ethereum doesn’t want to fail on TheDAO, solving smart contract and management issues is the right path

“There are two things you need to know about smart contracts: First, they are dumb; and second, they are not contracts.”

This statement was made by Patrick Murck of Harvard University’s Berkman Center, and was clearly in response to the attack on The DAO, the largest smart contract ever created, and its failure has caused many to rethink how smart contracts are ready for prime time.

At their core, smart contracts advance the development of decentralized applications by eliminating the need for trust. Since smart contracts can automate existing processes, many believe that smart contracts will one day reduce costs across industries.

However, the development of smart contracts has not been smooth sailing without any problems.

Especially with the development of Ethereum smart contracts, Ethereum has been regarded as a standard platform for creating smart contracts.

If the Ethereum community wants to continue to move forward, it must improve its technology and governance structure to support the goals of entrepreneurs and users.

Since computers were invented, hackers and attackers have been trying to break into systems by exploiting vulnerabilities in code.

This difficult approach to development can be seen as the reason behind the multi-million dollar attack on The DAO, the first major success for blockchain smart contracts, which exposed weaknesses in Ethereum’s scripting language that would hamper further development.

The DAO hack resulted in the theft of 3.6 million ether, currently worth $50 million. The attack showed that the Ethereum code was not complete. This turned out to be true. Since the attack, many articles have stated the flaws that Ethereum and its programming language Solidity have shown, and new vulnerabilities are constantly being discovered.

Previously, people were discussing the 'recursive call' problem of The DAO attack. Now, security researchers have discovered that The DAO has a 'solar storm' vulnerability and some other system errors.

All this shows that Ethereum smart contracts still have a long way to go to become more secure. However, this requires the joint efforts of the community and more decisive decisions, such as whether to conduct a hard fork to recover funds.

Stupid Contract

There is still a lot of work to be done before Ethereum smart contracts are ready for real-world use.

For example, Ethereum smart contract code is designed to remain unchanged forever, but the system is difficult or even impossible to achieve this because of the need to upgrade the code.

However, it makes sense. Once a contractual agreement is signed, it cannot be easily revoked. However, software systems can be upgraded at any time. This disagreement may be the main reason why smart contracts have not been implemented in the existing legal system 20 years after being proposed by Nick Szabo.

On a legal level, legal agreements often have loopholes that are then exploited. However, this is different from the case of The DAO. Therefore, careful consideration must be given when creating smart contracts.

“Code is law” sounds like a great slogan until flaws are discovered.

It’s clear that simple smart contracts are the ideal smart contracts, and this is determined by the design of Ethereum. Building automated governance in the way that The DAO wanted sounds great on paper, but it seems better to deploy small, interconnected smart contracts rather than large smart contracts.

Governance and transparency

The technology based on cryptocurrency is very special and many people get caught up in the hype of this technology without considering the long-term impact.

The price of Ethereum, as well as the expected profits from The DAO, certainly fueled the hype, as both projects used tokens to finance their development.

So, there are governance issues that must be considered, such as the danger of having an opaque governance structure where community members don’t know who is in charge. This type of configuration is not unlike the less transparent systems that Ethereum is trying to replace.

Right now, only a small group of stakeholders profit from cryptocurrency platforms, and this isn’t just a problem for Ethereum. For example, if Bitcoin were better governed, there would be specific standards bodies that properly define BTC’s purpose.

If nothing is done, a similar infighting over the definition of Ethereum could emerge.

For example, is Ethereum a smart contract platform? Is Ethereum suitable for deploying decentralized applications? Is Ethereum a value store? Is it a payment currency?

The various definitions that plague Bitcoin have made it nearly impossible to use as a fast payment method. Similar problems will arise if Ethereum fails to establish proper governance.

Smart contract issues are key to future development

Optimists believe that infighting will not destroy Ethereum.

Many are watching closely to see how things play out in the coming weeks and months.

The future of smart contracts and open blockchains remains bright. Ethereum still has a place — if it redefines its smart contract technology and solves governance issues .

The financial and economic applications of technologies in the cryptocurrency ecosystem are always enticing. Bitcoin was the obvious first, redefining the concept of value.

Programmatic protocols are pushing the cryptocurrency industry into deeper, more interesting territory. Before Ethereum, there was no open system that properly implemented protocols using code. Ethereum smart contracts do work. The DAO proved this — but also showed that a lot of refinement is still needed before production use.

Simple smart contracts paired with open blockchains can improve the legal system by increasing efficiency and further democratizing law.

But this is unlikely to be achieved until the technology and distributed control structures are fully understood.

Right now, Ethereum is the standard smart contract platform, but without a proper path forward, it will be easy for upstarts to take its place.

Note: Daniel Cawrey is the head of communications at Velocity, an autonomous derivatives project that utilizes smart contracts and is built on the Ethereum blockchain.