The book progresses. Current total: 17,472 words of body text. My target is about 500 usable words a day, so today I have to top 18,000. I expect it to make 20-25,000, at which point it gets edited and will probably end up 15-20,000. Amazing how much work one can put into a Kindle Short.
I have a rudimentary page up for the book, with rough draft excerpts!
(it'll also probably end up actually for real being called "Attack of the 50 Foot Blockchain" because I was sitting in bed with arkady, who is an artist and got all inspired with pulpy cover art ideas. I may even need to do a pulp cover and a sober business cover.)
Answers to Frequently Asked Questions
A. Sadly, Amazon Kindle only accepts conventional currencies.
You just learned chemistry and the first thing you built was a giant bomb and you can't understand why it blew up in your face.
– brockchainbrockshize, /r/ethereum1
Not content with their existing sales of Internet fairy gold, some Ethereum developers at German blockchain startup Slock.it came up with an even more complicated scheme: The DAO (a Decentralized Autonomous Organization, with “The” as part of the name). This was a program running as a smart contract on Ethereum which would take people’s money and give it to projects voted on by the contributors as worth funding: a distributed venture capital firm.
The DAO’s Mission: To blaze a new path in business organization for the betterment of its members, existing simultaneously nowhere and everywhere and operating solely with the steadfast iron will of unstoppable code.2
Bold in original. I’m sure there are no obvious problems there that jump right out at you.
The DAO launched on 30 April 2016, got massive publicity and became the biggest crowdfunding in history, with over $150 million in ETH from 11,000 investors. Fourteen per cent of all Ether was in The DAO. It was also the most prominent smart contract of all time, achieving much mainstream press coverage. It proceeded to illustrate just about every potential issue that has ever been raised with smart contracts.
The DAO’s legal footing was uncertain (and widely questioned). Selling tokens in The DAO closely resembled trading in unregistered securities – particularly when DAO tokens themselves hit cryptocurrency exchanges – and the SEC had come down on similar schemes in the past. There was no corporate entity, so it would default in most legal systems to being a general partnership, with the investors having unlimited personal liability, and the creators and the designated “curators” of the scheme likely also being liable.
Shortly before the go-live date, researchers flagged several mechanisms in the design of The DAO that would almost certainly lead to losses for investors, and called for a moratorium on The DAO until they could be fixed.3
Worse, on 9 June a bug was found in multiple smart contracts written in Solidity, including The DAO: if a balance function was called recursively in the right way, you could withdraw money repeatedly at no cost. “Your smart contract is probably vulnerable to being emptied if you keep track of any sort of user balances and were not very, very careful.”4 This was not technically a bug in Solidity, but the language design had made it fatally easy to leave yourself wide open.
The principals decided to proceed anyway, Stephen Tual of Slock.it confidently declaring on 12 June “No DAO funds at risk following the Ethereum smart contract ‘recursive call’ bug discovery”5 … and on 17 June, a hacker used this recursive call bug to drain $50 million from The DAO. And nobody could stop this happening, because the smart contract code couldn’t be altered without two weeks’ consensus from participants. The price of ETH promptly dropped from $21.50 to $15.
(Tual posted on 9 July a hopeful list of reasons why the attacker might just give all the ether back, just like that. Because it would be in their rational self-interest.6 This didn’t happen, oddly enough.)
Ethereum Foundation principals discussed options including a soft fork or a hard fork of the code or even of the blockchain itself, or a rollback of the blockchain. The community wrangled with the philosophical issues: this contract had been advertised as “the steadfast iron will of unstoppable code,” but it appeared only one person had read the contract’s fine print in sufficient detail.7 Some seriously debated whether this should even be regarded as a “theft”, because code is law and intent doesn’t matter (unlike in real-world contracts operating in a legal system, or indeed in fraud law). Others merely argued that the integrity of the Ethereum smart contract system required that incompetent contracts, which The DAO certainly was, needed to be allowed to fail.
(The proposed soft fork solution was to blacklist transactions whose result interacted with the “dark DAO” the attacker had poured the funds into. This would have been an avenue for a fairly obvious denial-of-service attack: flood Ethereum with costly computations that end at the dark DAO. This approach could only have worked by first solving the halting problem.8)
The DAO was shut down soon after, and on 20 July the Ethereum Foundation — several of whose principals were curators of The DAO9 and/or heavily invested in it — changed how the actual code Ethereum runs on interpreted their blockchain (the “immutable” ledger) so as to wind back the hack and take back their money. The “impossible” bailout had happened.
This illustrated the final major problem with smart contracts: CODE IS LAW until the whales are in danger of losing money.
Ethereum promptly split into two separate blockchains, each with its own currency – Ethereum (ETH), supported by the Ethereum Foundation, and Ethereum Classic (ETC), the original code and blockchain – because this was too greedy even for cryptocurrency suckers to put up with. Both blockchains and currencies operate today. Well done, all.
Apologists note that The DAO was just an experiment (a $150 million experiment) to answer the question: can we have a workable decentralized autonomous organization, running on smart contracts, with no human intervention? And it answered it: no, probably not.
4 Peter Vessenes. “More Ethereum Attacks: Race-To-Empty is the Real Deal”. Blockchain, Bitcoin and Business (blog), 9 June 2016.
5 Stephen Tual. “No DAO funds at risk following the Ethereum smart contract ‘recursive call’ bug discovery”. blog.slock.it, 12 June 2016. (archive)
8 Tjaden Hess, River Keefer, Emin Gün Sirer. “Ethereum's DAO Wars Soft Fork is a Potential DoS Vector”. Hacking, Distributed (blog), 28 June 2016.
9 Stephen Tual. “Vitalik Buterin, Gavin Wood, Alex van De Sande, Vlad Zamfir announced amongst exceptional DAO Curators”. blog.slock.it, 25 April 2016.