| | |
|
ArashMahboubiFirstEssay 6 - 10 Dec 2016 - Main.ArashMahboubi
|
| |
| META TOPICPARENT | name="FirstEssay" |
|---|
| | | The appeal of smart contracts, their code, has also been the liability that is stalling their widespread implementation in financial systems. Ever since the invention of computers, malicious programmers have been exploiting code. These data breaches regularly threaten critical data that isn’t cryptographically secured, but still pose risks to cryptographically secured financial data. | |
<
< | The recent hack of the Decentralized Autonomous Organization (“DAO”), which lives on the Ethereum blockchain, serves as a cautionary tale. The DAO was designed to crowdsource funds from anonymous stakeholders and invest it in projects voted on by the investors and administered through smart contracts. The DAO promised to revolutionize managing and allocating capital by functioning without a fund manager. Instead of the venture-capital firm being run by a traditional manager, the wisdom of the crowd would make the investment decisions. The investors then stand to gain on the profits, whether through dividends or an increase in the value of Ether (the Ethereum crypto-currency equivalent of Bitcoin). Soon enough, the DAO had become the largest crowdfunded project in history, raising over $150 million. | >
> | The recent attack of the Decentralized Autonomous Organization (“DAO”), which lives on the Ethereum blockchain, serves as a cautionary tale. The DAO was designed to crowdsource funds from anonymous stakeholders and invest it in projects voted on by the investors and administered through smart contracts. The DAO promised to revolutionize managing and allocating capital by functioning without a fund manager. Instead of the venture-capital firm being run by a traditional manager, the wisdom of the crowd would make the investment decisions. The investors then stand to gain on the profits, whether through dividends or an increase in the value of Ether (the Ethereum crypto-currency equivalent of Bitcoin). Soon enough, the DAO had become the largest crowdfunded project in history, raising over $150 million. | | | The DAO’s entire platform hinged upon the code behind the smart contracts. In hindsight, the level of trust placed in their code appears to be premature and misguided. Less than a year after the launch of the DAO, an individual siphoned about $60 million worth of Ether through a recursive splitting function. The recursive splitting function was a feature of the smart contracts; and this feature within the code allowed funds to be siphoned into a sub-DAO, which is exactly what the user did. The attack shook faith in the implementation of smart contracts in financial systems, and left in its wake what, on its surface, appears to be an intriguing legal battle, but in reality should be a fairly straight forward decision. |
|
|
|
|
This site is powered by the TWiki collaboration platform.
All material on this collaboration platform is the property of the contributing authors.
All material marked as authored by Eben Moglen is available under the license terms CC-BY-SA version 4.
|
|
| | |