The DAO is just Mt. Gox 2.0, it wasn’t hacked

Until recently I had a clear idea of ​​my views on the DAO incident. Should Ethereum do a soft fork, a hard fork, or nothing at all? I think it is best for the Ethereum community to do nothing. Here are my reasons.

The fact is, Ethereum and The DAO are separate entities. Ethereum is a computer protocol built on a unique blockchain platform. It exists for one purpose: to execute code on a large network.

DAO is the first platform to use the Ethereum network. The full name of DAO is Decentralized Autonomous Organization, which is a new type of company with an autonomous operating model.

Note that DAO is a company, a company without human intervention. DAO is made up of code, but investors can choose to invest in this platform.

In this way, DAO was not attacked at all, but simply executed the code, and it was precisely because of the accurate execution of the code that it went bankrupt. From an investment perspective, DAO is a failed business model. From a technical perspective, DAO was just executing the code accurately.

Mt. Gox 2.0

The DAO bankruptcy is reminiscent of the Mt. Gox incident. The entire Bitcoin community is aware of the media's failure to cover the Mt. Gox incident. At the time, many headlines read "Bitcoin is bankrupt!" or "Bitcoin is hacked!", which is of course not true. Mt. Gox is just a company that uses the Bitcoin protocol.

People had so much faith in Mt. Gox, but unfortunately, it went bankrupt. Investors lost a lot of money. It's a shame. There are a lot of things we can learn from the failure of Mt. Gox, but in the long run, this may be a good thing.

The DAO was no exception. In the early days of the crowdfunding, participants believed in it without any investigation. They invested money in this company, and then the company collapsed. (I think) All this has nothing to do with the Ethereum code.

In this light, it seems unreasonable for the Ethereum community to design a fork plan for the DAO.

Yes, a lot of money was stolen in this attack. But the cause was not a technical problem of Ethereum. Think about the bankruptcy of Mt. Gox, which caused a large amount of investor losses, but the Bitcoin community did not fork for this.

I think the most outrageous reason for this fork plan is to pay for Ethereum developers, because they also invested in the DAO. Imagine if a Bitcoin company went bankrupt, even if the problem was not in the code and contract execution, the developers would still try to hard fork, for no other reason than to get their investment back! This is a very dangerous precedent.

New 51% Attack

It is a good thing that the decision to fork was not made by the Ethereum community but by miners. However, we are about to witness a new type of attack on blockchain technology - an internal 51% attack.

The community is considering a hard fork not to fix a minor glitch, but to get back the funds lost due to bankruptcy. They invested in a company, which unfortunately went bankrupt, and now they want to forcibly get their money back through some means.

I say again, this sets a dangerous precedent. Whether the process is democratic or not, this is going too far.

Technical failure vs. bankruptcy

Suppose you open an account with Scottrade (a well-known online securities company in the United States), deposit $1,000, and then the following two situations occur:

(1) You lost the $1,000 due to a technical failure within Scottrade.
(2) You buy stock in a company, and then the company goes bankrupt due to a technical failure, and you lose the $1,000.

The first scenario is caused by an internal software issue at Scottrade, so it makes sense for them to fix the problem. That is, in this case they could “hard fork” their own software to get your funds back.

In the second case, the cause is another company's technical failure, so it is unreasonable for Scottrade to solve the problem. The fact is that you have invested in the stock of another company, and Scottrade cannot "hard fork" its software to help you recover your funds as if nothing happened.

Ethereum, like Scottrade Securities mentioned above, is only responsible for its own technical failures. They should not modify the code because of the loss of customers' investments.

Contract & Code

Let me give you another example of a technical error involving the DAO.

Suppose you voluntarily sign a contract that states that every time your neighbor knocks on your door, $5 will be automatically transferred to him from your bank account.

When you just signed the contract, everything seemed normal. Until your neighbor started knocking on your door. When you woke up the next day, your bank account was empty. So who is responsible? Did your neighbor steal the money? Did he hack into the system?

I think this example is very similar to the DAO incident. DAO distributed tokens through the splitting function, and if it continued, the bank accounts of participants would definitely be empty. The bankruptcy of DAO shows that this business model is a failure.

So is it reasonable to blacklist the attacker's address by forking, or even more extreme, to invalidate the transaction to get the money back? I am not saying this to say that the attacker is morally innocent. However, based on the fact that DAO is an autonomous organization composed of smart contracts, I don't think it is a crime.

Conclusion

I am not suggesting that this incident is easy to resolve. Since blockchain technology is still in its early stages of development, it is understandable that the community has stepped in to save a major mistake. I do not support the fork plan because it is a dangerous precedent, but it does not necessarily mean that this incident will be a 100% death sentence for Ethereum.

In fact, if the vulnerability occurred in the Ethereum code itself, everything would be much simpler. Unfortunately, this is not the case.

I hope this failure can teach us some lessons. First, in the future we should know that it is unwise to invest a large amount of money in some experimental projects; second, if the Ethereum community is determined to carry out a hard fork to retrieve funds, I hope this is the first and last time.