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A few months ago, Mintpal cryptocurrency exchange, now owned by Moopay LTD., was a victim of a massive VeriCoin hack leading to the theft of 30 percent of all VeriCoin in existence. In response to this, the developers decided to hardfork and roll back their blockchain to a point before the theft occurred, securing the VeriCoin for Mintpal. It proved to be a success, although VeriCoin’s value plummeted almost instantly.
Now, BTER cryptocurrency exchange has become a victim to another theft similar to the one above, where 50 million NXT were stolen. This time though, it’s only 5% of total NXT in existence. The community called for a roll back; the hacker ransomed the coin and took BTER for 100 bitcoins without fulfilling the ransom, and the developers offered a roll back at first, but have since taken that option off the table.
This blockchain change sparks a discussion on whether this kind of developer behavior is acceptable in an industry so bent on decentralization and natural growth. Is it truly ethical for a team of developers to simply roll back a cryptocurrency blockchain? Or is it their duty? This doesn’t just apply to Bitcoin either; it applies to every fundamental of cryptocurrency as a whole.
Decentralization is one of the main facets of digital currency. Nearly everything hinges on currency decentralization. But when the power to make such a drastic change at a moment’s notice lies in the hands of only a few people, the decentralization is shattered. As cryptocurrencies continue to have developers at the helm, they will always be centralized to some extent.
Rolling back the blockchain is two-fold. If the community decides to hard-fork with the update, then it is a democratic decision. If the community decides it doesn’t want to, then the fork is a failure, and they can continue using the same currency they always have. In that sense, even the centralized decision to roll back is at least in the hands of the community. But that still isn’t decentralization.
There might not ever be a consensus from the community regarding this debate. Cryptocurrency technology is so new and fascinating that it’s amazing to have these powers at our fingertips. Think if someone robbed a bank, took all the money, and the banks were able to just just to reverse the transaction? That’s the power rolling back to blockchain gives. Obviously, in the bank example, the FDIC or similar entity would step in. This is a feature of centralized financial systems that many thought cryptocurrencies did not have.
The question is, should it?
One NXT community member had some insight on the responsibility of the community member and the effect of the roll back:
“As a business owner and looking at NXT from the perspective of a system to assist the community to build new exciting systems that allow individuals, smaller companies and even larger ones to grow without the aging and bloated banking systems that we currently rely on and more importantly give back, it seems natural that this system needs to be safe and secure.”
“The ability for the community to protect its interests seems natural, not reversing this transaction seems unnatural. Such large incidents that harm so many people cannot just be allowed to go forward for the “Ideal” of block chain immutability. In fact in future there will no doubt be systems in place to prevent these types of lawless transactions, perhaps special types of wallets that operate on rules or votes, perhaps only exchanged would use these types of wallets with rules attached; whereas, regular users could opt not to and users would easily be able to see what rules the transaction is applicable to.”
While only a small portion of people are developers, that doesn’t mean they make all the decisions. Currency users can easily make their opinions heard through various ways. The first would be not hard-forking. If you don’t agree with a blockchain change, you don’t have to switch over. This method gives the power back to you. Of course, if you do agree with the blockchain change, then you vote with your wallet and make the shift.
Furthermore, there’s an opportunity for discussion to occur. Go to reddit, the forums or even the comment section of CCN articles and talk about the effects of the shift. Being silent and letting developers make all the decisions is not why cryptocurrency was created. You do have a voice, and you do have the potential to make it heard.
If you have something to say, comment on this article or visit the CCN forums and talk it out.
Editor’s Note: Vitalik Buterin has written about two instances of Bitcoin blockchain forking/changes that happened in 2010 and 2013. None of the aforementioned events involved developers leading a hardfork to counter a theft (lack of security in an individual or company).
Last modified (UTC): August 16, 2014 20:30