20 Jun 2016 12:05
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The DAO came fast and fell even faster. It's too early yet to know if The DAO is totally toast. There seem to be two roads forward, a fork, if you will.
The more oft-traveled road seems to be soft and/or hard forking to generate a second blockchain which will effectively negate the original chain that contains the hacking activities. Then, The DAO would be nixed and its funds would be returned to investors as much as possible.
In the other, less-traveled fork, The DAO would remain. A soft and/or hard fork may be incurred, or not and the loss of ETH just eaten, but either way, The DAO would remain. Like a traditional corporation that made a bad decision, like "New Coke" back in the '80s, the company doesn't fold. It cuts its losses. Like a dual masted schooner battered in a storm, it shortens sail, trims tack, sets a new course, and sails on, damaged, but not dead-in-the-water. The DAO still $91.99 million worth of ETH to play with—that's respectable funding by any standard. Remaining viable would certainly mean cleaning up the vulnerabilities in the code, but quickly closing, after all the effort, idealism, and panache of starting The DAO seems a rather knee-jerk reaction.
All things Bitcoin and crypto are ripe with sturm und drang. That's the game crypto-types sign up for. This latest DAO drama has sent lessons aplenty:
- Ethereum is doggone good. Take out a sheet of paper, draw a dark vertical line down the middle. Label the left hand side "Ethereum" and label the right hand side "The DAO". Take notes on each, but keep the vertical line intact. Ethereum works amazingly well. Sending/receiving ETH is darn-near instant. Combined with the "smart contract" (read "the ability to run programs over the network"), Ethereum is amazing. On The DAO side of the paper, there was a flaw in the coding. Ethereum ran the flawed code, flawlessly.
- Bitcoin is still king. Pre-DAO, there was much rising chatter about Ethereum eventually overtaking Bitcoin. The DAO has certainly humbled that twaddle. But, given time to lick is wounds, who knows going forward. If anything, Ethereum might push Bitcoin to evolve even further. Projects such as Blockchain's Thunder network seem very promising, especially in leveling Bitcoin's transaction time lag. Ten minutes or so is not a big deal if buying a car, it is a big deal on Friday night in a bar.
- People still rush in to join the perceived "next big thing."
- People still ask for a bailout when their speculations fail. This is something of a conundrum. Though largely loving decentralization, many folks still ask for some outside entity to bail them out at times.
- Decentralization is both a good thing and a bad thing.
- It's good for the many reasons Bitcoiners and cryptophiles champion all the time…cuts down on government bologna, cuts down on top-level book-cooking, many others but, generally, don't-tell-me-what-to-do.
- It's bad during a time like what The DAO is going through. Having a benevolent "admin" with hand-of-God abilities might have been able to snip the DAO attack in the bud. Or, now, might be able to quickly hack together a remedy. Even forking the blockchain would require time and consensus. Consensus, among crypto-types is proving to be difficult to manifest.
- Speaking of consensus, a fundamental tenet of The DAO is/was the wisdom of the crowd. X-million Ethereum-goers can't be wrong, can they? Here is the hedge of a DAO…
- A traditional corporation has a board of directors—professional types who live and breathe all stuff related to their sector of business. They're the pros (or they're incompetent, damage the corp, get fired, leave with a golden parachute, then are replaced).
- The DAO bets that the crowd is wiser than a board of directors. Even a DAO made up of amateurs, curiosity-seekers, for-quick profiteers, angry libertarian types who'll join anything decentral because it's decentral, dammit. Others have written well about how crypto may not be the best place to apply the wisdom of the crowd (sorry, but I forgot who wrote this or where I saw it). The premise was that to be effective, the crowd's wisdom relies on heterogeneity, folks have got to be unique. The crypto crowd ain't. The crypto community is largely male, young, techy, and they tend to communicate or at least read up on things in similar places, e.g. reddit. As a result, they are largely homogenous and are, therefore, prone to become tripped up by groupthink. Also, along these lines, the crypto community is decidedly not open to free, public debate - a major weapon to fight groupthink. Anyone speaking the high-blasphemy that some centralization might be a good thing is immediately, and loudly, yelled down as a crypto-witch. That young, male, techy who reads reddit is a sell-out-to-The-Man.
- If The DAO wants to survive and go on, or, if a new DAO emerges (and, of course, one will), the company would still need to do something that earns money or ETH. This seems like a fundamental cart-before-the-horse premise that The DAO and its investors launched into…they poured much money into a company that produces nothing, and only held the hope that it would invest in a company that produces something, maybe. To my thinking, this is the number one lesson and number one question in DAO investing…it may be good at raising money, what will the company do to earn money going forward?
The DAO is/was an experiment. One of the most fundamental tenets of experimenting is that despite the results, you learn either way. If your hypothesis or desired result comes to fruition, you learned something there. If your hypothesis is flatly wrong or the results don't turn out the way you wish, you learnt something there too—you learned what not to do. Then, you shorten sail, trim tack, set a new course, and sail forward.
Disclosure: I have a small, very small, stake in TheDAO. I have just enough to say, "I was in the first DAO! :) Then I lost my money. :("
