As many (most, all?) of you know, last week The DAO, a large crowdfunding experiment based on the Ethereum blockchain, was hacked and something like $50mm of Ether was taken from The DAO. That Ether may end up being recovered due to a fork of Ethereum that was done in response to the hack. Much of this was covered in Nathaniel Popper’s post in the New York Times last friday.
I won’t say that I predicted this but I certainly saw something like it coming in my blog post on Experiment and Scandal that I wrote a month ago.
Ethereum is brand new technology. The smart contracts that can be built on Ethereum are an entirely new thing and we are just seeing what works and doesn’t work with this technology. It is safe to say that the contracts that The DAO wrote did not work. The DAO is a failed experiment that suffered from more than poorly written and ill conceived smart contracts. It also suffered from way too much money and hype being invested in it. I was thinking of The DAO when I wrote these words a month ago:
I find myself wishing we could keep the dollars invested and hype down when we do these massively public experiments
It is an open question about what impact the failure of The DAO will have the future of the Ethereum experiment. It certainly shows that pairing a public and open blockchain with a Turing complete programming language and a smart contracts system is a very ambitious and potentially very dangerous idea. The price of Ethereum in dollars has been halved as a result of The DAO failure and it is unclear if the bleeding is over on that price chart. There is a very well articulated debate on Hacker News right now about the future of the Ethereum experiment. If owning Bitcoin is like buying an IPO stock, owning Ethereum right now is like buying into a Series A round. Let’s just make sure we all understand that please.
My partner Albert who is way smarter about the technology here than I am wrote a post on his thoughts on this subject over the weekend. You will see that he and I see things pretty much the same way (shock!). He ends his post with this thought:
Blockchains and smart contracts are amazing new tools in our overall technological toolset. We have to learn how to deploy them to the best uses (many of which have yet to be invented). That will take failures. The DAO is not the first one (e.g., Mt. Gox) and won’t be the last one.
I could not have said it better.