Ethereum’s Need to Self-Regulate So Legacy Powers Don’t Have To!
Written by Chaz Luciano
We’re firmly forked. The DAO is being decomposed and returned to the earth from whence it came. Ashes to ashes and all that. Let the loam feed a thousand new projects that have learned the lessons Stephan Tual so selflessly sacrificed himself (ourselves?) for, as if he were Prometheus bringing fire to the mortals, Jesus opening the gates of heaven, or Bruce Willis staying behind to blow up the asteroid in Armageddon.
Jokes aside, the DAO was a black-eye — a setback that the community has overcome. Congratulations. We are better in its wake. We’ve shown our ability to handle crisis and make strong decisions about the future of the blockchain. It is a great comfort to large firms that Ethereum has an immune system. But there are a few things — 3 come to mind — we could address as a community to make sure a DAO-type failure doesn’t happen again. I’m afraid if we do not, the legacy world will infiltrate our Universe and do it for us.
- The network needs a way to show its opinion and reach an ongoing consensus regarding the issues that affect it.
- The network needs a clear delineation between leaders and investors.
- The network needs outside firms that will audit and absorb counterparty risk for individual smart contract systems — The Guard comes to mind — the auditing system SingularDTV and Gnosis are using before they launch into the Ethereum ecosystem.
These three factors would go a long way towards creating a safe and effective platform that gives confidence to operators and investors alike. We can leave the DAO in the past only once we have taken a proactive stance on self-regulation.
What’s most important is recognizing what we can do to avoid any future fiasco and continuing some of the excellent discussions on issues that should be addressed as the ecosystem evolves. Actually, we need to do more than just have discussions, we need to make definitive choices about how to move forward. Consider the DAO a vaccine, a small amount of illness that will teach the Ethereum immune system how to protect itself in the future.
The illness for investors was fever. The hype for the DAO was unreal, given what it was — untested, insufficiently audited code. It’s a great signal from the ecosystem that so much capital was on tap, but with no assurance mechanism beyond a smart contract which a majority of investors probably weren’t able to understand.
In the paper world there are a host of legal entities that will assure your investment doesn’t get loopholed into nothing — and yes, they don’t work well all the time either. But on the blockchain it is entirely up to the investors to see that their money doesn’t wind up in the hands of someone who might be less than responsible with it — one who might spend 5 days auditing code that is meant to secure hundreds of millions of dollars for example.
The DAO situation has cast light on an important niche in the blockchain space that has yet to be filled. A series of independent companies that audit and insure smart contract execution would go a long way towards making Ethereum a safer, more resilient place to invest — The Guard mechanism comes to mind again. There is a great deal of value to be provided at the interface between investor and innovator, and between the blockchain and the real world. Counterparty risk insurance could become an expected part of due diligence on the blockchain.
On the side of the DAO developers, the illness was auto-immune. They failed to protect themselves from two small bugs that should have been easily thwarted. They put all their eggs in one basket and the basket had a hole. They knew about the hole and didn’t act fast enough to patch it. The result was $60 million siphoned off the top and a month long identity crisis for the very ecosystem that had made them momentary superstars. Innovators in the future will have to work that much harder to gain investor trust.
Within Ethereum the disease was multiple-personality disorder. While the case was very much that what’s good for the DAO is good for Ethereum, even the appearance of impropriety can have a drastic impact on the future of the network. Foundation members who are too closely intertwined with business interests on the blockchain will always find themselves under increased scrutiny, their motives always questionable. This is a drag for everyone in the space, and Ethereum would be a much healthier place if we can be assured that the people who lead the community are acting strictly and solely for the interests of Ethereum as a whole.
The discussions must continue, and the community must remain vigilant if Ethereum is to grow into what we dream it might. The DAO crisis has revealed basic needs that Ethereum must fulfill in order to reach its full potential.
Better we regulate ourselves than have the Legacy world do it for us. So onward and upward until the next big test comes along. And when it does, I hope we have a process in place to do something about it before it’s too late.
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