The problems caused by making vulnerable software immutable were revealed by the first major "smart contract"
. The Decentralized Autonomous Organization
(The DAO) was released on 30th April 2016, but on 27th May 2016 Dino Mark, Vlad Zamfir, and Emin Gün Sirer posted A Call for a Temporary Moratorium on The DAO
, pointing out some of its vulnerabilities; it was ignored. Three weeks later, when The DAO contained about 10% of all the Ether in circulation,
these vulnerabilities were exploited
allowing the removal of more than 3m ethers.
Subsequent exploitations allowed for more funds to be removed, which ultimately triggered a ‘white hat’ effort by token-holders to secure the remaining funds. That, in turn, triggered reprisals from others seeking to exploit the same flaw.
An effort to blacklist certain addresses tied to The DAO attackers was also stymied mid-rollout after researchers identified a security vulnerability, thus forcing the hard fork option.
The "hard fork" split the Ethereum blockchain into two. On the fork that became today's Ethereum the coins in The DAO ended up in a new "smart contract" from whence they could be recovered by the investors. On the fork that became today's Ethereum Classic, the coins stayed in the various attackers' wallets and were renamed ETC. When ETC started trading on 27th
July 2016 it opened at $0.60; ETH was trading at $12.97. Since then, ETH peaked at $4.8K and ETC peaked at $137, so it is clear which fork the market preferred.
Back in February
Laura Shin published Austrian Programmer And Ex Crypto CEO Likely Stole $11 Billion Of Ether
claiming to identify the perpetrator. The headline overhypes the story. The 3.6M ETH stolen from The DAO wasn't worth $11B
at the time of the theft, more like $43M. After the hard fork, the 3.6M ETC was worth under $3M; back in February it was worth about $100M.
Now, as the Ethereum team attempts to finalize their long-delayed goal of switching from Proof-of-Work to Proof-of-Stake
, another hard fork looms. Below the fold, I look into why this time things are much more complex.