The Ethereum hard fork, executed to prevent future hacks like the DAO fiasco, marks the first Ethereum bailout, according to Frances Coppola, a finance, banking and economics journalist, writing in Forbes.
The Ethereum community needed the hard fork to prevent future hacks because the code wasn’t properly tested to begin with, disproving the claim of “immutability.”
The majority of Ethereum miners had invested in DAO, so it’s no surprise they supported the hard fork since it allowed them to recover their investments. Those who objected on the grounds that the hard fork eliminated the blockchain’s immutability were a principled minority.
Coppola finds it ironic that the Slock.it tech geeks took credit for solving the problem when they were the ones who caused it by launching the code without sufficient testing.
Christoph Jentzsch, one of Ethereum’s founders, said it was remarkable that the Ethereum community came together to support a hard fork. Coppola wonders what was remarkable about a consensus among people who otherwise faced losing a lot of money.
What Coppola does find remarkable is the number of holdouts. According to Ethereum co-founder Vitalik Buterin, 15% of the miners did not vote for the fork, meaning they are either “saints” or did not have money at stake.
Jentzsch’s statement that the community has proven itself to be a “supreme court” on the question of the “code is law” strikes Coppola as a bizarre self-congratulation. Coppola views the support for the hard fork as more of a cabal than a “supreme court.” She sees it more of a case of “tyranny of the majority,” which is something that civilized countries’ legal systems make illegal to prevent a majority of self-interested people from amending the constitution for their own benefit.
“The fact is that Ethereum has compromised its principles in order to rescue a client,” Coppola wrote. The “Ethereum central bank” has recapitalized the DAO “commercial bank” in monetizing its debt.
There is much to say about an “incestuous relationship” between the two entities that made the hard fork decision inevitable, Coppola noted. The Ethereum miners and DAO investors were largely the same individuals.
“If you know you might get bailed out if you lobby hard enough, what do you do?” Coppola asks.
To prevent future bailouts, it is necessary to write good code and properly test it.
In examining the code, Coppola noted it would not have passed her review. She said the code did not maintain the integrity of the data it manipulated. While she looked at the code with the benefit of hindsight, and even the best reviewers can miss things, Coppola noted that Ethereum needs considerably more testing and review to be taken seriously.
The bigger issue, however, is what precedent the bailout has set. Buterin told The Wall Street Journal this isn’t the issue since Ethereum is still under development. As Ethereum grows, such forks will be harder to do.
Coppola argues that Ethereum should have been upfront about its unfinished state to its own and the DAO’s investors. She noted it is not ethical to convince people to invest in a product that touts its immutability, then claim it wasn’t ready for release and has to be changed when something goes wrong.
Coppola falls short of calling the situation scam, but she calls it “weapons-grade naivety” to believe rushed code should have gone live and sold as “immutable.” Having worked in financial systems for 17 years, Coppola said she has learned you don’t take risks with other people’s money.
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