It was a big week for excellent articles and interesting news. And obviously we can’t sum up the week’s top bitcoin and blockchain articles without mentioning the DAO hack. A lot has been said and written, with very few (I suspect) fully understanding what the eventual consequences will be. Is it a hack? Is it even a crime? Could it have been avoided? What will happen to the DAO now? I don’t have any of the answers, and my list of questions is even longer. But here are some good articles that cover some of the issues in a thoughtful way:
The DAO: An Analysis of the Fallout – by Michael del Castillo, for CoinDesk
“Both the soft fork option and the hard fork option would help preserve the interests of the anonymous token-holders. But the potential conflict of interest that arises is that those with the power to do the rollback of funds might also be those whose funds are at stake.”
DAOs, Hacks and the Law – by Swarm, via Medium
“However, according to the DAO’s own legal contract, there is no such thing as theft and the intent is completely unimportant — the only important and relevant thing are the smart contracts themselves. Consequently, there is no real legal difference between a feature and an exploit. It is all a matter of perspective.”
Thoughts on the DAO hack – by Emin Gün Sirer, for Hacking Distributed
“Had the attacker lost money by mistake, I am sure the devs would have had no difficulty appropriating his funds and saying “this is what happens in the brave new world of programmatic money flows.” When he instead emptied out coins from The DAO, the only consistent response is to call it a job well done.”
Thinking About Smart Contract Security – by Vitalik Buterin, for Ethereum Blog
“All instances of smart contract theft or loss – in fact, the very definition of smart contract theft or loss, is fundamentally about differences between implementation and intent. If, in a given case, implementation and intent are the same thing, then any instance of “theft” is in fact a donation, and any instance of “loss” is voluntary money-burning, economically equivalent to a proportional donation to the ETH token holder community by means of deflation. This leads to the next challenge: intent is fundamentally complex.”
The DAO is Dead, Devs Say. But Can Anyone Decide its Fate? – by Michael del Castillo, for CoinDesk
“It further remains unclear if any single member of The DAO, even Tual and his fellow Slock.it founders, have the authority to stop its continued open-source development, even if they think they’re acting in its best interest.”
Fund Based on Digital Currency Ethereum to Wind Down After Alleged Hack – by Paul Vigna, for The Wall Street Journal
“Investors seemed less concerned with the hack than with DAO’s decision to erase the fraudulent transactions. The move would be welcomed by most ordinary investors. But in the anarchic world of digital currencies, that sort of top-down reordering of events—even fraudulent ones—violates the decentralized ethos investors thought that they were supporting.”
Exclusive: Full Interview Transcript with Alleged DAO “Attacker” – by Andrew Quentson, for CCN
“Just speculating (because only 1 million to miners is committed), but it makes sense to have a carrot and a stick. Carrot: return some of the eth to the DAO to make righteous people happy. Stick: return some of the eth to miners if they don’t fork to give monetary incentive to not fork. So… the impact and amounts will be a lot smaller than current estimations and ethereum will absolutely survive, and can even prosper after a clean resolution without a fork. While a fork would irrevocably tranish ethereum.”
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The King of Swamp Castle – by John Biggs, for TechCrunch
Do you know the legend of the King of Swamp Castle? He built a castle on a swamp, because there were no other castles there, and because he could. It sunk. He built another one. It sunk. He built another one. It caught fire, fell over and sunk. But the fourth one held strong.
John Biggs asks why we are building our “new banks” on a swamp. Why aren’t we “thinking bigger” when it comes to applying blockchains?
“Connecting modern apps to old foundations is a chump’s game. Forcing Bitcoin and cryptocurrencies to play nicely with established players in any real sense is a pipe dream akin to Linux on the desktop.”
Bitcoin and the blockchain are having an impact on banking. But the banks are controlling that impact. This is not what the original vision had in mind.
“We need fiat money to start behaving like bitcoin. We need these new FinTech apps to work across borders, for money to be “interoperable,” transactions to be fair and fast, and ensure that regulations are adhered to, globally.”
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Just How ‘Smart’ Do You Want Your Blender to Be? – by Jacob Silverman, for The New York Times
This isn’t about bitcoin or the blockchain, but I’m including it here because it’s a really great article, which talks about our fascination with technology and the extent that it “controls” our lives.
“One of the animating myths of American capitalism is that of the savvy consumer. Informed, discriminating, wise to manipulation and deceit, this person fluidly navigates the waters of everyday consumption. And through these small decisions, replicated over and over again by millions of others, the free market improves life for all. Essential to this myth is the notion that influence and power work transparently. Experience shows that this isn’t the case, yet we continue to flatter ourselves by adorning our bodies, homes and cities with smart gadgetry and claiming that it serves us. Perhaps the real smarts on display here are those of the tech-industry mandarins who convinced us that we needed all this stuff in the first place.”
This also ties in with something I heard on a Tim Ferriss podcast in which Marc Andreesen wondered why the Establishment (and most people) are freaked out by the concept of a better form of money. We’re not freaked out by the idea of a better type of kitchen appliance. The idea of gadgets speaking to each other or to a seeing “eye in the sky” does not bother us nearly as much as the idea of a new financial system does. Why? Marc’s theory is that it’s because we are so dependent on the current financial system, that the very idea of something coming close to changing it terrifies us.
“But the true ingenuity of a “smart” device is the way it upends traditional models of ownership. We don’t really buy and own network-connected household goods; in essence, we rent and operate these devices on terms set by the company. Because they run on proprietary software, and because they are connected to the internet, their corporate creators can always reach across cyberspace and meddle with them.”
Why does that not scare us more than the idea of an alternative form of payment that governments can’t control?
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Reweaving the web – from The Economist
The increasing centralization of the web – with Facebook and Google earning 2/3 of online advertising revenues, with Amazon dominating e-commerce, with Microsoft buying LinkedIn – is raising concerns amongst those who remember that its original vision was for decentralized and universal access to information.
“Smartphones, which now generate more than half of online traffic, are not as open a platform as the internet: access to the two dominant mobile operating systems, Android and iOS, is regulated by Google and Apple, respectively. Cloud computing, too, is a centralised affair, with Amazon leading the pack, followed by Microsoft and Google. These same companies, as well as Facebook, are in control of ever-growing piles of personal and other data. Such information may ultimately allow these online giants “to predict, shape and ‘nudge’ the behaviours of hundreds of millions of people,” notes Mr Benkler in a recent paper.”
What could reverse this trend? Bitcoin.
“A big hurdle—which previous efforts at decentralised technology failed to clear—is to be as convenient and seductive as centralised incumbents. Regulators are likely to mount resistance against projects that transcend national jurisdictions…”
But once the technology spreads, can it avoid the inexorable pull of centralization?
“More fundamentally, an internet that eschews control points may be one that affords firms less opportunity to build profits. To create a return that makes venture capitalists happy, the new tech firms will almost certainly come under pressure to get ever bigger. Decentralisation might fit the vision of the web’s founding father, but the internet became centralised for a reason.”