Edan Yago is CEO of Epiphyte, a company that enables financial institutions to list transactions on the open blockchain. He is also a founding member of the Digital Asset Transfer Authority (DATA). In this guest commentary, Yago discusses the crisis of the DAO and how the future of the blockchain platform Ethereum will develop, depending on the decision of the community.
On 8 July 2011 the first Bitcoin bubble burst
A drop in value of 94% caused the price to drop from 31 US-$ to 2 US-$.
As everyone has noticed, Bitcoin has recovered splendidly since then. But now Ethereum is in a crisis. The DAO has been hacked, destroyed and most of the assets have been stolen. Like Bitcoin, Ethereum can recover – but a panic reaction could destroy the platform forever.
Unfortunately, we are moving more and more in the direction of this panic reaction.
Ethereum has for a certain reason such a value, and for that reason only – it is a Turing complete, smart contract protocol. In other words, the value of ether is a direct result of Smart Contracts and Ethereum’s position as the first protocol for such applications.
On June 17, The DAO was attacked as Smart Contract on Ethereum. Now we have to decide which of the two ways to go: We can learn from this lesson and develop better Smart Contracts in the future, or turn back the faulty Smart Contract and pull the floor under Ethereum’s feet forever.
We are dealing here with something much bigger than The DAO, or Ethereum: the idea of unchanging Smart Contracts.
The basic idea of Smart Contracts was brilliantly explained by the DAO. Made them to „go ahead with iron will and unstoppable code“. The basic idea is that the code is the contract and that no human intervention or interpretation is required.
It is automatic and „autonomous“
Deterministic results based on code – hence the value.
The value is 100% dependent on the possibility of running Smart Contracts on a protocol that is trusted and works according to deterministic rules. These rules are known before and make the work with them interesting. This is how Ethereum should be. What is now proposed, however, is that the rules should be changed retroactively at protocol level, since an exploit has been found in a contract at application level.
If you do that, you would destroy all trust, which made all contracts at the application level possible.