The Parity fallout: Which ICOs are affected? | Hacker News Reader

The Parity fallout: Which ICOs are affected?

elementus.io

88 pointsmgalka39 comments

This is why I'm really interested in Tezos. The promise of Tezos is that the governance will happen on the Tezos blockchain via voting by holders of Tezos. Decred is also doing something similar, but I don't think Decred has smart contracts, whereas Tezos will.

Here's a recent Tedx Talk by the CTO of Tezos. https://youtu.be/SbaVNkyGT3M

PS. I did not contribute to the Tezos ICO and I don't hold any Decred.

There's a complicated legal situation around Tezos that seems to be causing development delays. There is infighting among the founders concerning the legal structures established to hide^H^H^H^Hprotect the ICO money [1], and also a class-action lawsuit [2].

[1] https://www.cryptocoinsnews.com/tezos-derivatives-crash-amid... [2] https://www.cryptocoinsnews.com/tezos-founders-hit-class-act...

Yes, this is an unfortunate situation. Basically before the ICO happened a Swiss non-profit was formed called the Tezos foundation. The foundation would receive the ICO "donations" and then the foundation "may" provide the donors with Tezos coins when Tezos launches. I think this whole setting up a Swiss non-profit is just to get around the know-your-customer laws in the USA and also to avoid the SEC's rules about selling securities to unaccredited investors.

So now the Tezos foundation controls the ICO funds, which are now valued somewhere around $500 million, and according the Tezos founders one of the board members (Gevers [3]) has gone rogue and tried to grant himself a bonus that the founders say is not warranted.

What I've always found strange is that the other two board members of the Tezos foundation have never really been discussed publicly in any way. One of them is Diego Olivier Fernandez Pons [1] and the other appears to be a company formation agent, Mr. Schmitz-Krummacher [2]. I've been unable to find out how these other two board members were selected, which is a bit odd considering the fate of about $500 million and perhaps Tezos in general hangs in the balance of how these two people vote. Gevers formed the "crypto valley" in Switzerland, so I can understand he would be on the board, but I'm still not clear on how the non-profit was formed and the first place and how the board members were selected.

Here's a thread asking who is running the Tezos Foundation. https://forums.tezos.community/t/who-is-running-the-tezos-fo...

[1] https://www.linkedin.com/in/diego-olivier-fernandez-pons/ [2] https://www.linkedin.com/in/guidos1/ [3] https://www.linkedin.com/in/johanngevers/

Edit: This whole situation actually proves Tezos' point to me: that a cryptocurrency should not be controlled by a small group of individuals. In this case, the small group (the foundation) doesn't control the cryptocurrency, _just_ the ICO funds.

1. Foundations probably need multiple directors, this depends on the jurisdictions.

2. The people behind the project wanted to sell a US company to the foundation for $20 or $30mm, and I think this Gevers guy basically said that was excessive.

I think the foundation probably is legally required to have multiple directors, but you would think that a foundation that raised $500 million from "donors" would give out some information about who two of the three board members are and why/how they were selected.

Regarding your second point, can you provide a source for that? What I've read has alleged that Gevers tried to take a bonus from the ICO funds. "The Breitmans said Gevers had sought to pocket a bonus from the ICO proceeds, whose value had swollen to as much as $400 million because of a rise in the value of bitcoin, and then lied about it to his foundation colleagues." [0]

[0] https://www.finews.com/news/english-news/29289-tezos-johann-...

http://www.reuters.com/article/bitcoin-funding-tezos/special...

PS: What a shitshow. These people are amateurs who have been given $500m, and I wouldn't be surprised this project amounts to nothing.

Based on how I'm reading this, I don't think this Gevers character is entirely wrong on how he's acting. But the article doesn't mention any bonus.

I didn't see anything in the article you linked to where Gevers says that the amount ($20 million) the Tezos company would sell itself to the foundation for is excessive. As I understand it, that was always the arrangement. The amount the company would sell itself for was a percentage of the ICO funds raised, I believe.

I do agree that the situation is a shitshow.

Not sure where I read that, can't find it anymore

Great! Start with the Federal Reserve and SEC settings rules in a somewhat transparent process, run by people appointed by democratically elected governments.

But people started doubting monetary policy, rule-making around securities, and the democratic process in principle. Lo and behold: someone creates a system with all of its ideology baked into an algorithm that cannot be changed.

But that leads to rather obvious injustices. And where, previously, these were settled in the open court of law, now the response was a faint shrugging: "That's how it's supposed to work. Shoulda audited the 43,563 lines of code underlying your really smart contract", said one unnamed cryptobro incapable of distinguishing ex ante and ex post fairness[0].

So now we get yet another blockchain, which is almost like a democratic government. Except your wealth determines the power of your vote. (Plus, of course, it's also untested, and throws away everything the concept of democracy stands for except the faint resemblance of something not entirely unlike voting).

[0]: Example: your parents decree in their will that their $100,000,000 fortune shall be distributed among your sister and you according to the following rule: Flip a coin. Heads: Jane gets everything. Tails: Bob gets everything. That process is fair ex ante because you enter with equal chances to win. But the result it produces is decidedly unfair. Good thing it doesn't matter, though: Your mother lost that fortune somewhere in the blockchain, which lead to that horrible horrible murder-suicide that brought you two here today)

Not sure why you're being downvoted for this. Seems like a valid concern for such a system.

It's probably the tone and broken window theory which is embraced by this community.

It would be interesting to put this in numbers.

Now a bunch of people with quite a good amount of ETH have their accounts frozen. Of course (I assume) they'd vote for a change that allows unblocking these accounts. Incidentally, who created the bug is also inside this group (if I'm not wrong).

Questions are:

1. what should the community as a whole think, to change and unlock, or to not allow any change?

2. what would the power of the community be wrt to these bigs, it this was Tezos?

I think some sort of painful event is necessary for certain types of change. Like the Titanic encouraging safer ship specifications and processes. Contract safety needs to vastly improve before smart contracts can be relied on.

Forks should only happen IMO when all sides have merit, when each side is right in their own way. The DAO situation may be justified in that not doing so would have damaged the community too much. Like forcing a kid to forget truly traumatic events but letting them remember broken arms while skateboarding.

Once a child grows up though all actions are irreversible and there is no longer a parent figure to ameliorate mistakes. I'm uncertain what "age" to consider ethereum but I'd tentatively consider it a pre-teen skateboarding incident.

Interesting analysis.

What I always find interesting about these crypto incidents is how quiet everyone is, including the parties that end up "losing" significant amounts irreversibly. There's never an investigation.

In this case the funds are frozen in place, not stolen by a hacker. The reason it happened doesn't take much investigation; see my explanation at the top here: https://news.ycombinator.com/item?id=15642856

You want an investigation on how the funds got frozen?

If your new $100,000,000 skyscraper collapses and the engineer says "oops, I had my slide rule set to imperial units" would you not talk to a lawyer about it?

In most cases, indemnification clauses are even invalid for gross negligence. I seem to remember that software has carved out some limitations. It remains to be seen how long they will last if idiots such as these continue to use them in their little scheme to separate fools and their money.

While counterparty (XCP) isn't as rich as Ethererum, I wonder: is it adequate for what many of these ICOs are intended? It's unfortunate that it likely requires higher transaction fees but it seems much simpler to me (and trustless).

You're spot on. counterparty is a better platform for token offerings, and was the dominant platform until the term "ICO" emerged, and all token sales took to ERC-20.

The ERC-20 standard is now finalized as an official EIP (Ethereum Improvement Proposal), meaning any bugs in the leading implementation will almost certainly be considered a protocol bug and rolled back with a hard fork.

So I don't think there's any disadvantage in using Ethereum for token sales, and plenty of advantages like experimenting with new token sale smart contracts (different auction mechanisms to allow better price discovery), not to mention the larger suite of compatible applications (anything ERC-20 compliant like Etherdelta or 0x for decentralized exchange).

Also, Counterparty uses a port of the Ethereum Virtual Machine, so any innovative uses of it will have the same risks as using Ethereum.

Counterparty can run the EVM port, it doesn't run on the EVM port.

Yes I didn't intend to imply otherwise. That's why I specified "innovative uses", as opposed to all uses, of Counterparty as suffering the risks as Ethereum

Oh look. The ethdevs lost more money. I guess we'll expect to see another hard fork, with more sinister language? (edit: 1)

Yeah, this whole episode is what's wrong with Ethereum. Solidity was sold as a cure-all. And its a bugridden festering sore that leaves money for the takings. These side effects should be caught if there was a good lang used: and Im talking about a possibly nonturing complete DSL.

Instead, we have innovative companies that are building on this quicksand thinking its a good foundation; its not. How many more millions will be lost before someone goes back to the drawing board and does this monetary infrastructure right?

(1) https://labs.mwrinfosecurity.com/assets/Uploads/_resampled/R...

Yes, amateur hour all around - it's almost as though random individuals with limited tech experience are allowed to mess with a production system.

But, this is exciting and fun, and I feel good things will emerge from this eventually.

The developers made the right choice: ship now rather than take the time to do it properly.

There will eventually be a reckoning when either the bottom falls out of the market or all these ICOs are banned as unregistered secuirities offerings, and like the Silk Road some people will go to jail. It's vitally important to take as much money as possible off suckers before this happens.

https://www.youtube.com/watch?v=3kEfedtQVOY

The Science of Insecurity: Why Turing complete languages cause problems

This is the same kind of complaint as was with C, Perl, PHP, then Javascript.

All of these languages broke new ground, not in programming languages, but in domains. The people building these languages weren't PL experts -- they were just trying to solve problems. The domains got successful, and the languages either evolved or were replaced.

This is exactly where Ethereum is right now.

There's a big difference in code that runs in the browser, and code that represents cold hard cash.

If I go to a shock website (.on.nimp.org) it'll likely take down my browser. That's about it. Worst case is I get hit with a 0-day. I might* lose money in the worst of worst cases. Mostly what I lose is time in restoring from that.

With Ethereum/solidity, anyone anywhere can affect the 'chain, and inject naughty bits and do bad stuff. Except instead of causing a security problem, you deleted/took millions of dollars.

Point being, this language should be feature-limited, simple, and easy to read/parse. There shouldn't be undefined things that lead to semi-undefined functions. If you're making the next Brainfuck v2, sure have at. But this isn't a toy lang or a browser lang we're talking here.

"The Code" (which you, nor most dont really understand) is the contract. Good luck in seeing what you really agreed to.

> code that represents cold hard cash

People traded "cold hard cash" for tokens. Those tokens then got lost, stolen and changed in value. Speaking from the sidelines, people losing money isn't of particular concern. We're getting some interesting science, economics and art out of the process; re-allocating capital for those pursuits isn't particularly bad for society.

> People traded "cold hard cash" for tokens.

And, tokens are... Money! Instead of being enforced by people with guns who will shoot you, it's enforced by math.

> Those tokens then got lost, stolen and changed in value.

Same with US currency, to the dot.

> Speaking from the sidelines, people losing money isn't of particular concern.

Really now? At least where I live, if someone or some place loses a lot of money, cops are called, and insurance can be summoned. There's a big response. And there's restorative methods to stem that problem.

And if I went and stole $1000 from a bank, you can be your ass the cops are going to be there quick, and on a manhunt.

> We're getting some interesting science, economics and art out of the process; re-allocating capital for those pursuits isn't particularly bad for society.

No, we're not. The blockchain is inherently really awesome. So are the new proofs-of-X being discovered. But the language, Solidity, is more like Liquidity. The coding errors inherent here are major show-stoppers. I wouldn't put $5 in that pile.

If someone could make a better lang and attach it, then I'd certainly reconsider. But not with Ethdev, and certainly not with Solidity.

> tokens are... Money!

Some people are calling them money. (Those same people don't seem to want the rules and requirements that come with calling something money.) I don't see why society needs to devote public resources to enforcing private crypto claims. If people are harmed, they can sue. It's not like these markets weren't screaming caveat emptor from the start.

More broadly, we're getting value from detached observation. American securities laws and conventions were built in the 1930s. They have since been replicated worldwide. Cryptocurrencies are giving us a chance to see what laws are still necessary, which may be anachronistic given cultural and technological changes and for which there is a better way. Think of it as a publicly-funded experiment for the benefit of finance.

>And, tokens are... Money!

The amount of services that are taking Internet Fun Bucks as exclusive payment (read: not immediately turning them into some other form of fiat) are so few as to consider them statistically insignificant. Calling something money when you can't do anything meaningful with it unless you convert it into other currency is laughable.

Who uses untested C code to control an "oops I just lost $100M and there's no recourse" system?

Pacemakers, satellites, rocket ships, cars, nuclear plants, etc.

Those systems are most definitely not running "untested C code."

My dad was an automotive engineer for Faruecia (sp?). A lot of emissions code is code he wrote. Wil Crawley , if you look up his 13 or so patents. He did things like the Electronic Muffler (which cancelled exhaust sound with antisound from a hardened speaker).

I saw what he did for code review. He didn't "review it". He proved each function, for every input and output. The code he wrote had side effects that only 1 function could write to - and the function was called to change it. And those side effect variables were never critical ones.

It was as close to Mathematical Proof as you could get.

This sounds good and all, but there is actually a thing called provable correctness or formal verification, where code really is provably correct.

See for example https://ts.data61.csiro.au/projects/seL4/

And they generally have recourse, there are insurance services for rockets, even if you ignore the redundant hardware.

They're running tested C or Fortran, but there have been at least two rocket losses due to software error.

http://www-users.math.umn.edu/~arnold/disasters/ariane.html

https://www.itworld.com/article/2717299/it-management/marine...

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