The DAO incident shows that blockchain cannot avoid social problems

Rage Comment : The failure of The DAO project shows that new technologies are not always smooth sailing, because without the test of practice, it is easy to have loopholes and produce some unexpected negative effects. Therefore, before start-ups call on people to put their life savings into the project, they should clearly tell them the possible problems and consequences of the project. Voting with Ethereum means that the more Ethereum people have, the more say they have. They may be more inclined to put all votes into their own proposals instead of spreading funds into projects worth investing in, which means that the decisions made may not be correct. The final method of handling the fork of The DAO also seems to violate the principle of immutability, and The DAO's credibility has also been greatly affected.

Translation: Nicole

Everyone loves The DAO and has endless ideas about how it will change the world.

Now, The DAO has been shunned by the digital currency community after it was discovered that hackers had made off with 3.6 million ether (worth $60 million at the time) on the code-based crowdfunding platform.

This incident shows that these new technologies are not always smooth sailing or always revolutionary.

Technology can have bugs, negative consequences (both intentional and unintentional), and possible complications that companies should be aware of before people invest their life savings in these startup projects.

The advantages of The DAO have been discussed countless times, but the disadvantages of this decentralized crowdfunding platform have not received much attention. This is an economy that requires more cooperation, just like Bitcoin.

Now there are rumors that The DAO may be over. With the project’s failure, expectations for Ethereum have also been dashed.

I doubt it, but the community will start figuring out how to solve social problems that arise on the platform, even on a technologically advanced platform.

Use credibility as a vote

Because DAO tokens represent votes, users with the most tokens will also have the most votes. The core meaning of this is that it allows wealthy people to have more choices, while people with lower social status do not have such advantages.

To be fair, early adopters bought in at a price of 100 DAO tokens per ether (the price of this outlay decreased over time), and as more people invested in the project, the value of each token increased, and their investment appreciated.

But early adopters are indeed wealthier, with higher education, more income, and a higher standard of living.

As the revolutionary label of The DAO becomes more commonplace, this kind of reputation-based income is how the current political system works, and when income disparity grows, it becomes scary to many people.

As we have seen, this is not always the best process for most voters.

Silicon Valley vendors make a strong case for venture capitalists throwing large amounts of money at startups without knowing the details of the projects. Of course, they have to take risks on some companies and business models, which ultimately leads to some failures, but these failures are very outrageous.

Additionally, there are startups that want to build technological solutions to this disenfranchisement, but many of these projects are unable to get funding because these users don’t offer a very lucrative future return.

The problem with placing decision-making power in the hands of the venture capital community is that voters with the same background may not be able to make the right decisions for the general society.

This problem was highlighted in the Medium article, “The DAO: How Not to Screw It Up?”, which mentioned Peter Thiel’s seven key questions for evaluating startups, none of which asked whether consumers wanted or even needed the product or service the startup was promoting.

Using tokens as a reputation indicator for voting is also detrimental to the next generation of social media platforms.

For example, Steemit wants to create a social site that spreads proven reliable information, but these adjectives depend on voter polls. The site wants to get support from cryptocurrency enthusiasts first, which means that votes that believe in the advantages of cryptocurrency will increase, while its disadvantages or shortcomings will be ignored, thus obscuring the views of other users.

These projects highlight why assigning voting functions to currency tokens is problematic, as money is a highly desirable commodity and conflicts of interest can quickly arise.

For example, because founders of projects seeking funding can buy DAO tokens, they may be more inclined to put all the votes on their own proposals rather than spreading the funds among worthy projects.

As a commentator on a recent CoinDesk story wrote, The DAO is the last open source project in the wild — “financial support for a good idea” — but the question arises, who gets to decide what a good idea is?

Well-informed voters

Another issue that could arise is that some token holders do not understand the projects they are voting for, another problem that again plagues today’s system.

Stephen Tual

Stephen Tual, founder of Slock.it, the startup that wrote the code for The DAO, told Reuters:

“The DAO appeals to people who are tired of centralized projects where they have no say.”

But even in centralized projects, participants have some say. Stakeholders push founders in several directions, and in the current democratic political process, the majority gets a vote.

Even if their preferred candidate doesn’t win, they can change the conversation.

People feel powerless in the current system because it is too complex and there are many barriers to participation. Policy issues further accelerate this disillusionment, as they are very different from people voting to agree or disagree.

Encode everything

The idea that technologists can encode every human interaction is a popular one.

Perhaps the human brain is a "computer" whose operation depends on environmental stimuli, which may one day be encoded into a set of rules. But I think the relationship between these causes and effects cannot be solved by code.

Putting the problem on a blockchain or a decentralized system does not provide a solution if the process is still very complex and the system will have the same problems that our current more centralized systems have.

Although, if done correctly (important reminder), decentralization can eliminate corruption because the process separates one person or small group from powerful authorities.

With the recent DAO “attack”, the Ethereum team has stepped back into the authority position – whether you consider this to be righteous or not – to stop the “attacker” from removing funds from the child DAO account, and to reverse the transaction to return DAO tokens to the original token holders.

On the surface, this seems to contradict the immutability that the project touts, but it’s a good example of how uncoded disclaimers are sometimes necessary.