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Comment by j_s | Hacker News Reader

Was it Ethereum or the DAO that failed?

As an outsider looking in on trying out my first cryptocurrency, Ethereum was definitely on my radar. Now that the founders have shown they are capable and will undo the way the system has executed if they do not like it, I feel much more comfortable keeping my money in fiat where the regulations are well-defined and I know I have recourse through the law. I do not want to be subjected to the whims of an unregulated group operating under unknown rules with an unknown, possibly nonexistent, path of rectification if they chose something I did not like. I otherwise would have accepted the operational philosophy similar to how Bitcoin has been handled thus far and all of the responsibilities associated with a level, permanent playing field. I honestly am no longer interested and do not plan to keep up with Ethereum.

I'm just N=1, but if the trend continues then I see it not growing beyond a hardcore self-interested group of people.

>Now that the founders have shown they are capable and will undo the way the system has executed if they do not like it, I feel much more comfortable keeping my money in fiat where the regulations are well-defined and I know I have recourse through the law.

US fiat failed and was only rescued through ad hoc legislation. US fiat would not exist today if new rules (unknown at the time of failure) were not defined to essentially rollback prior transactions.

I do not know what you are referring to, but I point out that fiat means "by decree". So US fiat only exists through legislation. When is legislation not ad hoc?

Well in absolute everything is ad hoc but think about it this way:

You are pretty much guaranteed that, modulo some events, any US president from any party will honor their predecessors' decisions, pacts, treaties, etc. And you can be assured that the whole nation will follow them, because of of the Rule of Law!

What you've just witnessed in Ethereum is a bunch of rich, moderately intelligent, technocratic and very technologically literate (but not necessarily well educated ("who would want a government when you have code bah!")) visionaries and mostly speculators crying to get their money back by abandoning the very characteristic (immutability) that distinguished them from traditional systems of governance! They had a modus operandi that "Code is Law", and they've now turned against it. "Code is Law unless X". Why have that when you can just have plain and simple "Law"?

Yes, and if ETH is behaving the same as US dollars then there is no reason not to just stick to US dollars.

Thank you for exactly making my point. There is a legislative process, no matter how ad hoc and pressing the issue is, that can attempt to rescue US fiat. There's no way to divine every rule which is needed for a fiat currency to keep succeeding. And rules change over time with the ebb and flow of balance of power between nations, their trade, their military might, etc. Legislation provides a well-defined process for changes to be made. Whether you trust that legislative process seems to be a key point in choosing a cryptocurrency.

Now take Ethereum: suddenly changes to the transaction history needed to be made which violates the one law of cryptocurrency that's been shoved down my throat ever since Bitcoin hit mainstream media. So with no process set (because it should not have been needed in the first place), a sudden reversal of intent for one arbitrary contract, and no way to have the original intent stay binding, Ethereum made its choice. It didn't even have a legislative process, just an authoritative one guised as a democratic vote. The way that choice went down shatters all trust. If US Treasury suddenly decided it didn't need to follow any US legislation and redistributed wealth across the world, trust in USD would equally be shattered. I'm not a gambling man, but at this point in time my money stays in USD.

Uh, you're welcome?

I don't think I made your point, though. The laws that were passed to rescue the previously failed rules were utterly unknown at the time the failure was occurring. Instead of those rules being followed through (resulting in the complete destruction of debt-currency), a political elite was able to force a rescue of the failed actors. Wealth was redistributed across the world as USD should have ceased to exist and all debt vanished, but was allowed to be propped up at the whims of technocrats (Fed buyers).

You did, I just think you are getting hung up way too much on the wording of this quote I said (emphasis mine):

> I do not want to be subjected to the whims of an unregulated group operating under unknown rules[...]

I read it as "operating under unknown rules", so I don't mean the laws as currently written but the legislative process used to change the laws so they can be fixed (this was my intended meaning). I agree with you fully: the rules can, do and will fail and the next set of rules are utterly unknown now. But rulemakers are currently operating under known rules: the legislative process. Always have been through all the US fiat changes.

The lack of trust in the legislative process is what makes cryptocurrencies attractive. I infer (possibly incorrectly) you also share a healthy mistrust in the legislative process, just as I do. But Ethereum never laid out a formal process governing these sorts of changes (not a legislative, authoritative, nor democratic one) so the implication to the whole world was that none would ever be needed (because cryptocurrency) and people trusted that this fact would be respected. With this DAO reversal, Ethereum has broken that assumption many people hold, and lost that trust. This is why the OP in the article is upset: the process that resulted was an authoritative one disguised as a democratic vote in his or her eyes. And I am inclined to agree.

Edit to remove typo "as as" to "as".

Hard fork and Soft fork were always part of the process. In fact, you can democratically vote through whatever you want in the ETH/DAO system, either through the established code for voting or by developing protocol extensions. People can freely choose what code they want to run, or not.

The bailout of USD can also be described as an authoritative one disguised as a democratic vote. Congresspeople were told the world would end if they did not vote for the legislation they were handed.

I agree with you, because that's how the legislative system works. Lobbying, pass-this-or-we-all-die-scaremongering to whip the votes, and more all fall under the rules of the legislative process. Like I said before, you and I share an unhealthy skepticism of that legislative process. But for some reason I keep having to circle around this point: the legislative process is well defined and enshrined and advertised in law (constitutional or otherwise) whereas the ethereum process is clearly not as evidenced by a 5% turnout and an immediate distrust in the process by constituents. Representatives aren't blindsided about a new kind of vote the President made up that is default "yea" that results in a 5% voter turnout.

This is the last time I'll attempt to make this point.

Ethereum is fully open-source (that is my understanding anyway; I have never used it), so all the code is known. Further, anyone may participate, or not; contribute code, or not; promote and run their own protocols, or not.

Congressional elections are typically decided by ~25% of citizens. Not very far from the 5% rate you are claiming. Sampled approval rates have been as low as 11%. The most recent rate I've found is 16%.

Your point is about minimal discrepancies and misses (for me) the much, much larger picture.

The potential for forking was always part of the reality, but never part of the myth, which tried hard to bury the fact and instead pushed the idea that Ethereum was proof against manipulation. My guess is that many of its supporters have either bought the myth, or are speculating that many others will do so.

> US fiat would not exist today if new rules (unknown at the time of failure) were not defined to essentially rollback prior transactions.

[citation needed]

This should be common knowledge.

Here is one Paulson quote:

>You could just see it. We could see it and it was one of the most frustrating--when I look at the things I could have done better, there were a lot of them and they come out in the book, but the communications challenges were huge. I mean, I sat there when the capital markets froze, before we went to Congress, and the money markets weren't working, and I just tried to think about how to explain this. Because I knew--I was seeing major, blue-chip industrial companies that were having trouble raising financing, so I knew with $3.4 trillion of money market funds, and with everything that was just getting ready to break apart, that if the system had collapsed there'd be thousands and thousands and thousands of mainstream industrial companies--middle-sized companies, large companies--that wouldn't be able to raise their short-term funding, finance their inventories, pay their people. People wouldn't have been able to pay their bills. This would have rippled through the economy. We would then have had--well, today we have over 10% unemployment. That's terrible. And that's after everything we've done. If the system had collapsed, when we were on the brink, unemployement easily could have been at the 25% level that we saw at the Great Depression, and the value destruction--much greater than we've had in terms of home prices and in terms of people's savings accounts and stock portfolios and so on.

>https://www.amazon.com/Brink-Inside-Collapse-Global-Financia...

And Bernanke: >He said that bailout was necessary because “we knew that the collapse of the firm would potentially destroy or at least paralyze the global financial system with tremendously bad consequences for everybody.”

>http://www.centraljersey.com/news/princeton-former-fed-chair...

The clearing system is not the currency, although it's certainly important to daily functioning. Nor is the system of short-term trade credit the currency either.

Also, where's the "rolling back of prior transactions"?

None of this is about the clearing system. It is about money (ie. credit [ie. debt]) creation. New money must be continually created to replace the money destroyed through principal payments. If new money is not created at a sufficient rate, the existing money is rapidly destroyed as pre-scheduled principal payments eat it up.

>Also, where's the "rolling back of prior transactions"?

AIG's CDS/O's should have basically all failed, per the rules of the system. These were just papered over. "Pre-emptive rollback" might suit better.

> "Pre-emptive rollback"

You can't roll back something that hasn't happened! That's not how causality works! :)

Both. Etherium's smart contract system turned out to be too hard to program correctly, and the DAO botched their program. Etherium needs to go back into the shop for a redesign. Maybe a full virtual machine is the wrong model for contracts. The problem with programs as contracts is that the goal of contracts is predictability. Something more declarative might be more predictable.

Ethereum failed when it forked to try to mop up the DAO failure.

DAO failed, but it controls about 15% of the total ether supply, so it was too big to fail, and the fork will save it.

The DAO did exactly, exactly, what it was supposed to do. In no way can it be have said to fail, except in the "wasn't a great investment" sense. Maybe in failed in the "wow using terrible languages to write complicated code is a bad idea" way, too.

Ethereum failed, as they decided smart contracts aren't a great idea, so they're now going to involve humans when they feel like it. The whole premise of Ethereum was the opposite of what they're doing.

Yes, that is a more accurate description. The Ethereum community was very quick to call the guy a thief, without due process.

So what happens when new bugs are found in contracts controlling a lot of money? Fork again or let the buggy code run?

I believe that Ethereum+DAO was a sucessful experiment (with negative results) - they had a vision/hypothesis that smart contracts without human/legal overrides are a good idea, despite the experience of the whole financial and legal world over the last couple of millenia telling them that this vision is naively utopic. The whole point of Ethereum was implementing and testing this vision in practice, which they did.

In practice they found out (and showed the public) the kind of consequences everyone was expecting; and so we have a successful experiment giving some evidence on whether smart contracts w/o overrides are a good idea - apparently, it's not; and now based on this we can build better systems that properly account for the risks that DAO had.

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