Historical Analogy between Brexit & the DAO and Public Blockchain on Consensus, Fork, Decentralization and Security

Apr 17, 2018 · 10 min read

Brexit and the DAO Hack

What is ‘Brexit’? The term is short for “British exit” — shorthand for the UK’s exit from the EU following the referendum result on June 23 2016, this unanimous referendum contributed a profound impact on the political and economic landscape worldwide. Obviously, the referendum is a way of reaching a consensus. Six hours right after the release of Brexit, “What is the EU?” came to the top search on Google. It indicates that the unanimous referendum has done under the situation that even many people did not know what the EU was. The next day, more than one million Britons will jointly hope for a second referendum.

Code was supposed to eliminate the need to trust humans. But humans, it turns out, are tough to take out of the equation

The DAO launched on 30th April, 2016, for whatever reason, the DAO was popular, raising over $100m by 15th May, with a 28-day. By the end of the funding period, The DAO was the largest crowdfunding in history, having risen over $150m from more than 11,000 enthusiastic members. Unfortunately, by Saturday, 18th June, the attacker managed to drain more than 3.6m ether into a “child DAO” that has the same structure as The DAO. The price of ether dropped from over $20 to under $13.

Meanwhile, Vitalik Buterin of the Ethereum Foundation issued a critical update, saying that the DAO was under attack and that he had worked out a solution. in order to save The Dao investors’ losses, the final decision was make to the hard fork.

In fact, prophase middle and late stage during the crowdfunding of The DAO project, many people indicated their design flaws and called for a temporary suspension of project crowdfunding. However, due to various reasons, those warnings did not cause enough attention to The DAO project team, which triggered DAO hack. Furthermore, this is an avoidable attact, but also reflects the greed of human nature.

The Brexit in which human society has reached consensus and the DAO hack in the blockchain seem to be unrelated incidents. But it is the most intense discussion of “consensus and fork, centering and decentralization” in the blockchain field. Hopefule, this article indicates the analogy between the Brexit & the DAO and the public blockchain.

The value of consensus

The consensus makes human beings valuable, since people do not live isolated. Furthermore, strong social attributes and networking which requires exchange and communication among people on the purpose of reaching consensus. How could we reach consensus? The first level is the linguistic consensus. The second level is semantic consensus. The third level is the implementation of consensus. In a consistent language environment, common understanding, people really implement the expected conclusions could be reached. However, in practice, deviations often occur in the implementation process.

The consensus is costly, take Brexit as an example again; the referendum off the European Union is time-consuming and laborious. First of all, we must mobilize all people have a reasonable understanding; Secondly, organize people to vote; thirdly, we have collect, sort, classify, and calculate the voting information; and finally, generate the result. The seemingly simple referendum, or the process of obtaining consensus, maybe it cost more than what we think.

Blockchain consensus VS human being consensus

The blockchain is established under consensus, a solid and unchangeable true record of consensus formation is formed. Here the longest chain represents the truth, and all people will accept it. And other branches are forked. There will be many new forks in the blockchain with the chain formation process. Fork is competitive with each other contribute that only the longest one can preserve and be recognized by all. This is the common rule of blockchain consensus.

On the other hand, the opposite of consensus is “differentiation.” But what causes the differences? First of all, in the process of reaching a consensus, there is no real consensus on connotation and extension. Secondly, even after a consensus is formed, people do not actually implement the conclusions based on the consensus mechanism. These disagreements could not generate the consensus. Once a new block is generated, it is synchronized to all or most of the nodes in real time. That is, once a consensus has been formed, it needs to be ensured that it is actually implemented. Only in this way can we ensure that all blockchain networks will always have a consensus.

With time being, the DAO hack attracts more people’s attention increasingly, especially in the term of soft forking and hard fork. “Hard fork” means that all transactions will be tracked back to a point in time before they are stolen. And “soft fork” is equivalent to closing all transactions from the attacker’s address.In simple terms, through active fork techniques, good people and attackers disagree, and the attacker’s malicious transaction is not recognized by most (good) people.

Byzantine General: Centered and Decentralized

From a comprehensive and objective expect the Dao hack, The Dao is the most important experiment of Bitcoin. In a world where everyone is accustomed to centralized management, and how to achieve a decentralized management organization? This problem could not get through is the issue of “General Byzantine”, which is a classic problem that assumes that good people in Byzantine are in the majority. The generals of the Byzantine Empire’s army must all unanimously decide whether to attack a particular enemy. The problem is that these generals are geographically separated and there are traitors in the generals. Traitors can act arbitrarily to achieve the following goals:

(1) Defrauding certain generals to take offensive actions;

(2) To facilitate a decision that not all generals agree on, such as when the generals do not want to attack to facilitate offensive actions;

(3) Enchant some generals to make it impossible to make a decision. If the traitor achieves any of these goals, the result of the attack is doomed to failure, and only a fully-consensual consensus can win.

The “Byzantine General” issue is a good example based on the settlement of consensus mechanisms, involving centralization and decentralization. If it is a centralized solution, it is none other than people who collectively elect some people as the general, and then the generals come to discuss and vote until the supreme commander makes a final decision on all factors. The decentralized solution is regarding all people are generals, and everyone is directly involved in the final decision.

Furthermore, distributed system and decentralization are often confusing, and even one-sided people think that distributed is equivalent to decentralization. In fact, distribution could be centralized, and centralized may also be decentralized. For example, all voters are required to go to the same place for the referendum. It is interesting that to select representatives to make decisions or all personnel to make decisions directly. Guess please, among those two methods which one ultimately leads to better decisions? In different perspectives, the answer is also questionable.

Centralized and Decentralized result of Brexit Results

If the above problem is mapped to the field of data mining and machine learning. “All staff” corresponds to “full sample data.” The “representative” corresponds to the filtered “sample data.” The “decision made” corresponds to the “generated model.” Unexpectedly, we will find that the data model generated based on full sample data may not be of the highest quality. Instead, those models are based on screening samples are more effective. The reason is very simple that when we are using full samples, we can’t avoid introducing additional noise. Accurately speaking, the full sample is sometimes not conducive to algorithms that generate models that match the distribution of real data. When noise is removed, the new model is more accurate. This is the statistical principle why people often need to do data cleaning operations before data modeling.

This difference is particularly evident in the Brexit. We can figure out that the big differences between the northern and southern parts of the UK. Northern Scotland and much of Ireland people strongly support the retention of Europe (yellow part in the picture), while most people in the southern region opt for Brexit (blue part in the picture). From all the British (full sample), the majority of people who chose to leave the European Union occupied the majority. In this process, it is obvious that the huge contradiction between local features and global statistics. If taking a centralized or decentralized approach, the conclusion may be completely different.

In the blockchain domain, the main advantages of decentralization are reflected in the support of “point-to-point” direct transactions and the establishment of strong trust relationships with many weak trust nodes. In the centralized solution, the center often becomes the “bottleneck” of the entire system, and becomes the weakest link in which the system is most vulnerable to be attacked. In order for the center to have sufficient processing power, throughput, security and reliability, it si often required to purchase the very expensive equipments.

Soft fork and hard fork is not inconsistent with decentralization

What is the correlation between disagreement or fork and decentralization? There is no necessary connection between those two indeed. From the DAO hack incident point of view, due to the fork proposal was Vitalik represented by the Ethereum Foundation appealed. Therefore, people might regard that “Is this not a new center?” Furthermore, there is a fundamental difference between such appeals and advocacy and true centralization. Whether people really make soft fork or hard fork depends on single people who are involved in building and operating the Ethereum network. As Vitalik stated in one of his public response that I will not stop or oppose the other’s their views or opinions in public or even lobby the miners to resist this soft fork.

Meanwhile, in the course of The DAO hack, there are a lot of rumors about whether “Ethernet blockchain is a decentralized network as it advertises” and “Ethereum blockchain will be stopped”. Because of the emergence of bitcoin mining machines and mining pools, there was a center for the calculation of bitcoin designs that were originally decentralized. These computing centers have a great impact on the Bitcoin network. Therefore, Ethereum could be carried out a new design, considering more decentralized approach, and reduce the possibility of specializing in the design and manufacture of the Ethereum mining machine in the future. The principle it adopts is very simple, which is, block calculation based on Ethereum blockchain must be based on relatively large memory. Existing miners that can perform Hash calculation directly on the bitcoin system. As a result, the cost of manufacturing Ethereum mining machines has become very expensive and centralised mining methods have been avoided as much as possible.

Of course, we must objectively treat the contrast between Bitcoin and Ethereum’s ecosystem, and Bitcoin still Take the absolute advantage. From the perspective of hash computing power, the average computational power of Bitcoin’s current network is about 1,500,000 TH/S, and Ethereum’s computational power is 4 TH/S, a 4 million-fold difference. There is also a problem of over-concentration of mining pools. Some domestic experts are optimistic about this matter. Another fact is that the vast majority of bitcoin mining pools are built in China. This is helpful for China to increase its influence in Bitcoin’s virtual world. From the point of my view, absolute centralization and absolute decentralization are undesirable; in particular, the fiery blockchain is now more based on Bitcoin’s existing blockchain design. The price increasing of Bitcoin’s is in kind of indicator that people are optimizing on blockchain technology in the future.

The DAO’s Security Alerts in the Middle and Application Layers

The most critical question that people are concerned from the DAO hack is the security issue. All security is needed to be hierarchical. As figure below indicated, in the Ethereum eco-system, the bottom level is the Taifang virtual machine — — EVM. The middle tier is a programming language or script needed to support application programming, such as Solidity, Python, Go, etc. The top level is various applications written in languages ​​such as Solidity. For example, the DAO is one of an Ethereum application. This architecture is analogous to the IT ecosystem that we are now familiar with. At the bottom level is the various operating systems people are familiar with, such as Windows, Linux, UNIX, For example, if it is a mobile ecosystem, it corresponds to Apple’s iOS and Android’s Android system. The middle tier is a variety of programming languages ​​such as Java, C++, Python, etc. The top level is a variety of applications, such as Taobao, WeChat etc.

After the hierarchy is divided, it is easy to trace back the problem. There is no necessary connection between The DAO Hack and Ethereum EVM. Just as there was a security issue when using Taobao or WeChat, and it’s crashed suddenly which could not due to the problem of Windows or IOS. However, the loopholes in the underlying system might contribute security problems in the upper application. Fortunately, in the DAO hack, security vulnerabilities did not appear in the underlying EVM, but it were origin form on recursive call vulnerability in the solidity programming. Just like there was a bug in the Java language, which led to the crash of Taobao or WeChat, this security issue is irrelevant to Windows or IOS.

In conclusion, one of the biggest problems of the public block chain is the contradiction between security and efficiency, that is to say that how to figure out the optimum balance between decentralization and efficiency? From the perspective of the public blockchain, it avoids the limitations of the intermediary institutions and establishes a peer-to-peer trust paradigm. As well as from the perspective of the alliance blockchain, its consensus approach is more based on the Byzantine fault-tolerance mechanism. Since it is multi-centered and balanced between each other, by establishing a distributed ledger, the possibility of any participants to change any records is minimal

As the international public blockchain originated from China, PCHAIN has always been committed technology driven, it’s no doubt that the native multi-chain system support larger transactions than intelligent contract platforms, and PCHAIN has been closely followed by community developers worldwide.

PCHAIN is making large-scale blockchain applications happen and enabling people to access the blockchain anytime, anywhere, as simple as accessing the Internet nowadays.


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