Vulnerabilities are exposed in TheDAO, the IMF calls Bitcoin “The Internet of Trust,” and Star Trek money becomes legal tender in Canada
This Week In Bitcoin (7/20/2016)
As far we can tell, Satoshi didn’t explain why he coded bitcoin sans looping functions, although it is clear that many potential problems were avoided.
The challenge of creating a cryptocurrency with looping functions (aka Turing-complete) was taken on by Vitalik Buterin and the Ethereum team. Before Ethereum was a year old it had garnered a market cap of $1.5 billion. By contrast, bitcoin took more than four years to achieve that valuation. While much support for Ethereum undoubtedly comes from excitement about decentralized applications it hypothetically allows, it’s also well known that support comes from bitcoin haters and doubters, as well as bitcoiners frustrated by the conservative development of bitcoin code.
The first application to gain traction on the Ethereum platform was TheDAO, a decentralized autonomous organization designed to fund investor-directed venture capital. Crowdfunded via a token sale in April 2016, TheDAO quickly absorbed nearly 14% of all ethereum tokens (aka ether) making it the most successful crowd fund ever, with access to $150 million worth of capital. One proposal on TheDAO would allow people to live in perfect solitude, with nothing but an internet connection and weekly rations of Soylent, delivered by drone.
Things started to come apart at the seams on June 9 when Peter Vessenes dissected a vulnerability within TheDAO’s code first noticed by Chriseth: “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.”
On June 17, reddit user Ledgerwatch posted: “I think TheDAO is getting drained right now.” The aftermath saw 3,641,694 ether, worth roughly $45 million, transferred from theDAO to a “child-DAO,” where they will remain for a 27-day quarantine, as specified by the code that runs TheDAO.
The attack is a huge setback for TheDAO and a large setback for Ethereum, which bills itself as a platform for applications that, “run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.”
There are many proposals being debated for dealing with the attack, including a fork that would essentially confiscate all funds from the person who excercised the vulnerability. Many have pointed out the irony of implementing such a fork, since it is counter to the idea of an autonomous entity.
To add to the drama, the attacker (or someone claiming to be the attacker) posted a letter asserting that the “attack” was legal, since TheDAO’s own terms specify that its code is its law, and even threatened legal action in case of a fork: “I reserve all rights to take any and all legal action against any accomplices of illegitimate theft, freezing, or seizure of my legitimate ether, and am actively working with my law firm. Those accomplices will be receiving Cease and Desist notices in the mail shortly.”
Commenters are comparing this episode to the insolvency of Mt. Gox and the bitcoin bug of 2010 where billions of bitcoin were created in a single transaction. At least one commenter believes Ethereum is doomed.
In other news, bitcoin is still good and the IMF even called it the internet of trust.
In fiat news, Star Trek Money is now legal tender in Canada!
In Alex news, I’m focusing more on podcasting. My latest is a wide-ranging an interview with u/aminok. You can subscribe with this rss feed: http://feeds.soundcloud.com/users/soundcloud:users:121596458/sounds.rss
