DeFi bug accidentally gives $90M to users
cnbc.com
cnbc.com
Notch it up to another first for crypto.
And that is one of the biggest misconceptions of crypto stuff.
Law and contracts (1) determine who owns what, not who happens to currently hold it.
That's why the founder can threaten them with the IRS, because they (likely(1)) do not rightfully (as defined per law) own it.
This is also why NFTs are kinds stupid, because you totally can sell someone a NFT which "claims ownership rights" without selling them any ownership rights legally seen. Sure it's most likely fraud as you deceived people, but only if. So telling people you sell them the NFT but not the think behind the NFT would make that pretty legal. Like you can sell a certificate about the correctness/quality of a picture without selling (or even having) that picture.
(1): Smart contracts are not contracts, they are computer programs. They might also contain contracts, but that doesn't mean that just because something is done in a certain way in a smart contract it is legally binding, legal, or anything (Well, that's also true for contracts themself).
This statement is nonsensical - the IRS has no enforcement mandate for theft/fraud, nor does it have any authority to return stolen property. All the IRS would do is say "Hey, I heard you got an extra $NN last year - please pay your taxes on it".
It could even be argued that by reporting people the the IRS, the founder is implicitly admitting that the current possessors actually do own said crypto, otherwise they wouldn't owe any tax on it.
https://www.irs.gov/publications/p17
Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8, or on Schedule C (Form 1040) if from your self-employment activity.
:)
It seems that the only thing you own when you purchase an NFT is the NFT itself. Not a little jpeg that it points to; just the bit of code on the blockchain.
It's kind of tautologically stupid. You buy a receipt that states you own that very receipt.
But if people buy deeds instead of the house itself (i.e. most NFTs) then the link becomes broken and the signifier of “ownership” is less useful.
And as it is used for digital goods, the signifier of “ownership” is already broken, as multiple people can have a copy of the item without their being any ownership conflict, unlike a house.
This seems wrong. Here's the quote from the founder:
> Otherwise, it's being reported as income to the IRS, and most of you are doxxed.
It seems to be "return it or else it will count as your income," which seems... weird. Do most crypto people just not pay taxes on crypto? How is this a threat?
In fact, that threat almost makes returning it the riskier move. Are they going to report all of these transfers to the IRS? Will the IRS consider it income, and then a gift back to compound if I return it?
[edit] there's even a cottage industry supporting folks who refuse to pay taxes in getting second passports and abandoning their US citizenship. [1]
[1] https://www.cnbc.com/2021/07/11/plan-b-passport-tax-break-bi...
The thought experiment that made this concrete was a sort of reductio ad absurdem:
Let's say for a moment that NFTs win worldwide support and begin to be used as proof of ownership for everything. As part of this movement, the Louvre registers an NFT signature for each item in their collection.
Now, let's say a nefarious actor manages to use social engineering and convince a naive Louvre curator to transfer the NFT ownership of the Mona Lisa.
This bad actor promptly goes to Sotheby's and asks them to list "his" Mona Lisa for sale.
---
Of course, the Mona Lisa would not go anywhere. The French government would never allow it. This is an extreme example but can be walked back to less and less valuable items: would this work for an NFT of a house, a car, a computer, etc?
Unless the state decided to universally and with no exceptions enforce ownership of NFTs, they are ultimately worthless.
Most developed contries have digitized their deed system, so I am not sure how you can con someone out of their deed.
Also, back when we did use physical deeds, there generally was owner’s copy and land office’s copy, and on the back of the deed would be the transfer history.
So to con someone out of their deed, you would not only need to get the owner’s deed, but you would also have to get your name added to the land office’s copy.
Therefore I have to conclude that NFT usage is an extremely radical act against state power, because what it says is that the state doesn't matter, this blockchain(the one you are using at that moment) does. And you are accepting that your rights end where it does, too, so you had better trust the community.
https://mobile.twitter.com/moo9000/status/144389383001774899...
“Send the money back or we’ll follow the laws we were supposed to be following anyway!”
Patio11 had a thread on Twitter better than this article.
At most, it works like that for anyone rich or working on behalf of a big firm, which isn't exactly a ringing endorsement. And don't you worry, cryptocurrencies are just as capable of reversing transactions of those with the real power! [2]
[1] Thanks to blfr for finding the link: https://twitter.com/patio11/status/1443738002065268736
[2] https://www.gemini.com/cryptopedia/the-dao-hack-makerdao
Wash. Rev. Code §§ 9A.56.110, 9A.56.130, 9A.04.110
For example
That would seem to present all sorts of risks for his users, and himself, legal and otherwise.
(Also, I assume you mean tax evasion? Avoidance is the legal one.)
It does nothing of the sort. It's a enormous leap based on an assumption of bad faith to go from expecting protocol users to sort out their own personal tax situation to "willfully assisting in tax avoidance."
There are obviously lots of subtleties here, including places where no-one knows how the legal implications will shake out, but "expecting … users to sort out their own personal tax situation" isn't always an option; for example, my bank isn't allowed to assume I'll sort out my own personal tax situation and must report my interest earned, whereas, say, Amazon is allowed to make that assumption, and so need not report the items that they have sold to me. It could be that this is a more Amazon-y situation, but it could also be that it's a more traditional-bank-y situation. Probably even the IRS and Leshner, but definitely those of us who aren't involved in the situation, don't know which it is.
Playing devil's advocate: it's not exactly "free money", it's free "tokens" of some kind, which might not be convertible to money at the same rate which was used to estimate the tax. If the tax amount was assessed at the value the tokens were supposed to have today (based on what they recently traded for at some exchange somewhere), but you were too slow and only traded the next day and the price paid for these tokens has fallen heavily, you might have to pay more in tax than the money you can get from these "free tokens". So yes, it's not hard to imagine a situation in which paying tax on that "free money" can be "the end of the world" for some.
Let's assume the income case, a qyestion: What would happen if someone took these coins then transfered them to a new wallet while claiming that their private key was compromised. So "theft" essentially. Would they still be on the hook for taxes?
The real downside to crypto to me is that there is no ownership, only proof of authentication credentials ownership.
Just like stocks (you don’t pay for any changes in value to the stock until you sell it for fiat currency).
If I receive $XX, would happily pay %Y of that to stay above board. If the IRS wanted to audit me, my personal war chest is now $XX-%Y greater than it was before and more than adequate to cover whatever past (accidental) tax errors I may have had in the past.
But paying taxes on it doesn't make it legal if it was illegal for non-tax reasons, it just makes it not-tax-evasion.
EDIT: Also profitable, taxes should be less then 90%. Just out of curiosity, isn't DeFi motivating users to defraud the IRS by promising 10% without reporting it as income?
EDIT: Come to think of it, if they are offering 10% without reporting to the IRS, which is obviously less than after taxes, would it be reasonable to assume all revenue / profits have not yet been reported to IRS as revenue?
Why even bother trying to make a mountain out of a molehill? You are building on a red herring.
Anyway thats a lot of idioms
And taxes on gifts are presumptively payable by the donor, not the recipient.
Disclaimer: not tax advice, YMMV etc.
Technically the profits are a result of the computer code of the system, though. If they want to stick to their arguments that smart contracts are the law, then it’s just a regular payout from the system according to the rules of the system. Business as usual.
However, I suspect when the losses are in the tens of millions they’ll drop the pretense of “code is the contract” and start pursuing other legal avenues. The loss was about 1% of the total money locked in Compound.
But a mistaken payment is also not income and threatening willfully to mis-file a 1099 is completely inappropriate.
If they want to get the mistaken payments back, they can ask nicely, they can send threatening letters, they can sue in court; but they can't use the IRS as their cat's paw because the only tax situation that fits the facts here is gift.
If one wants to claim it's a mistaken payment, then the recipient needs to return the tokens - their legal ownership was never conveyed.
Additionally, you can tell the intent is not that of a gift because the transferrer immediately wants it back.
If you keep it, and it's over the taxable limit, you have to report it and pay tax.
* it was paid under the terms of a valid contract and need not be returned, and therefore is income (as this rests on the existence of a contract embodied by the protocol, it is not a gift, but an exchange for value.)
* it was an error and must be returned.
This seems to be an offer to settle for the former treatment if the recipients refuse the offerers claim that the latter is correct.
[1] A recent high-profile example where the facts and circumstances meant the wrongly wired funds were legally kept by the recipient: https://www.theregister.com/2021/02/19/citibank_money_mistak...
You can't just get rid of 100% of bad things about regulation and keep 100% of the good things about regulations. It reminds me of people who start open relationships. The upside sounds great, but there is a huge potential for downside and you may not fully appreciate that until it happens.
Other analogy that may be relevant are cases where casinos had slot machines with bugs awarding more prizes than the casino intended. In some cases/jurisdictions the courts ruled in favor of casinos, that the money was awarded incorrectly and should be returned; but in other cases/jurisdictions favored the winner, saying that the winner did everything right according to the rules of the game and should keep the winnings.
Also the Pepsi 349 Scandal in the Philippines in 1992 comes to mind [1]. In that case courts side with Pepsi, but I suspect that money has some inertia in Judges minds, so it was easy to side with Pepsi when it haven't paid yet. I suspect that if all that money had actually been automatically transfered to the many winners, then Pepsi would have a much harder task to convince the judges to make everyone transfer the money back.
Right?
If people signed a paper contract and a software system was designed to implement the contract, but the software system erroneously (through a bug) did something that went against the contract, that would be an erroneous payment. But if the code is the contract in a smart contract, bugs aren't contract errors.
The thing about crypto and ownership is that the blockchain is not the final arbiter of legal ownership, and that qualifier matters in a lot of cases.
[1] https://www.cnn.com/2021/02/16/business/citibank-revlon-laws...
[2] https://www.ktvu.com/news/woman-jailed-after-refusing-to-ret...
https://www.cnn.com/2021/02/16/business/citibank-revlon-laws...
Those users will be doxxed anyway, they should just keep the money since they are on the hook for it anyway now.
Also, I wouldn't mind paying taxes on some free money since I still get to keep 66% of it.
It seems likely the IRS will subpoena them for the data regardless, and potentially seek conviction of tax fraud.
While I ironically enjoy that he thought the best way to intimidate cryptocoin people was to threaten them with taxation, it does highlight cryptocoin's primacy as a way to acquire nation currency without paying taxes on it.
Like the sketchy folks who run Tether and Binance at the same time.
Or Elon Musk tweets raising and lowering the value of Bitcoin by a significant amount.
Even Bitcoin itself is largely held by just a few people. It's just another tool for billionaires to get even richer.
That has strong implications the company is not reporting properly to begin with.
Wouldnt be a first for the capitalist class, but using your legally required tax as blackmail is... well.. Interesting.
I don't generally like government intervention, but I do hope the "real" financial system is sufficiently isolated from these scams so their collapse won't cause problems.
Cryptocurrencies have failed to do the equivalent – that’s why the pitch is “buy in now or you’ll wish you had later” rather than talking about things you could actually do that you can’t do as well now.
1. A very popular electric vehicle business (#1 & 2 best-selling EVs, top 10 across all vehicles)
2. A popular home sold and battery provider (3rd in the U.S.)
3. A large and popular EV charging network
4. A large collection of patents, software, manufacturing capabilities, and contracts for the previous three points
Shareholders are still seeing a lot of growth potential but if the market takes a downturn the floor of that value is still quite substantial, especially since the world is turning hard to EVs. Even the bad hypothetical scenarios are something like Toyota buys them at a lower price than shareholders want, not utter disasters.
In contrast, here's the sole value behind almost all cryptocurrencies:
1. How much the community thinks someone else will pay for a token
The floor is $0.00 because cryptocurrencies are the most distilled form of fiat currency with a very weak backing. Nobody is required to use it and almost everyone has alternatives which are at least as easy and affordable so it's possible to end up in the case where simply nobody is interested buying in your particular set of random hashes at any price, or where the cost of operating the network exceeds that value.
That's an apt way of saying that, as Tesla is the first publicly traded cult.
Contrast with cryptocurrencies which have no intrinsic demand or business outside of being speculated on. As Bitcoin has shown, this can get you a lot of speculative money but that doesn’t mean there’s any lasting benefit. Normal people would have their lives affected if Tesla folded but if Bitcoin shut down tomorrow nobody outside of speculators would be impacted.
Crypto, and all other forex trading, is a zero-sum game.
Bank runs like from the movie "Its a wonderful life" - they don't happen anymore. Currencies devaluating like an exploding balloon - not since the civil war. Sure, it costs you more, but it saves you more.
Lotta benefits to crypto, but lots of hurdles need to be overcome (power and security for a start).
Another example of a bank run is the bank run of Northern Rock on the 14th September 2007. This was the biggest banking problem in the United Kingdom since the banking crisis in the seventies, this was also the first bank run in the United Kingdom in 150 years. Eventually, this resulted in the nationalization of Northern Rock. It is interesting to analyze this bank run because it is one of the most recent bank runs in Western Europe. Furthermore, the bank run from Northern Rock is a special case because it was a ‘reversed bank run’. Normally during a bank run, a lot of depositors first withdraw their money, due to lack of confidence for example, and then the bank will as a result of the huge withdraws get into a liquidity crisis. However, in the case of Northern Rock, the bank first got into a liquidity crisis and as a result of that, depositors withdrew their money from the bank.
https://arno.uvt.nl/show.cgi?fid=116241
It certainly looks like a bank run - the scenes in London today fulfilled the dictionary definition.
And heading north to Nottingham, and Middlesbrough, the same extraordinary scenes. savers forming long queues to drain their life savings from Northern Rock.
Banking -- an industry built on credibility, confidence and trust. But the Rock looks wrecked even in its home town of Newcastle.
Deposit guarantees should prevent this. But even after an extraordinary unlimited lending facility granted by the Bank of England and agreed by the Chancellor, customers preferred the sight of real cash.
https://www.channel4.com/news/articles/business_money/the%2B...
* It was somewhat less in 2007
I've witnessed and been (indirectly) affected by a bank run in the last decade[0].
0. https://en.wikipedia.org/wiki/Seizure_of_Bulgaria%27s_Corpba...
The Fed Reserve and Treasury and FinGov apparatus does some 'stress tests' but mostly a dog and pony show.
Banking in US is mostly element of convenience than quality. No one ran from Wells Fargo accounts (at least retail users) to say Bank Of America because Wells Fargo is fined for basically fraud.
In short term its a good thing, in long term.. well it is prone to blow up, I hope that is not in my life time.
It would be a mistake to think of these two features as easily separable.
Here is $24bn of losses due to credit card fraud: https://shiftprocessing.com/credit-card-fraud-statistics/
If the bank bears the losses, then the burden is indirectly distributed to all its customers/shareholders. If the government bears the losses, then its distributed to the whole economy.
> Bank runs like from the movie "Its a wonderful life" - they don't happen anymore.
In the Western developed countries. There are billions living in countries/systems where currencies are devaluating like hell and where banking regulations is looser than crypto.
There was one at the beginning of the coronavirus epidemic in the US. A friend of mine runs a branch of a major bank. Just as lockdown was announced, they were mobbed by people demanding cash. The branch ran out of cash and had to close early. It was a bit of a frightening experience for the bank staff. But not a disaster. The branch ordered more cash delivered from the bank's cash center, added extra guards, reopened the next day with the ATMs fully loaded, paid out cash all day, and were back to normal traffic levels by the end of the day.
A bank run is something that forces the bank out of business -- it makes the bank insolvent. This happens because the bank can't convert its illiquid assets (e.g. mortgages) to cash in order to meet depositor outflow.
That doesn't happen anymore in part because there are markets for things like mortgages that didn't exist before (making those mortgages liquid) and also in part because banks are on the one hand regulated to control what types of assets they are allowed to hold but at the same time they are given access to lending facilities in which they can pledge their assets as collateral to get reserves directly from the Federal reserve, which will never run out of reserves, and with those reserves they can purchase cash from the Bureau of Engraving. Then trucks will ship that cash to the branch. Yes, it may take some time, but the bank will always be able to close out deposits after a brief delay.
Obviously banks try to minimize their cash holdings because cash pays no interest. So they have cash management professionals whose job is to predict cash demand (which is predictable) and hold no more cash than is necessary to meet that demand, parking the rest of their working capital into short term interest bearing liabilities like commercial paper or bills. Today, even reserves pay interest. So everything is better than cash. That necessarily means unexpected events will lead to a situation in which the cash management team underestimates a cash need and so they have to sell some assets (or borrow reserves), pick up the phone and order a truck. That happens quickly but not instantly. When that happens, e.g. when the cash management team makes a mistake, it's not considered a bank run, even if it means that a branch has to close until the armored trucks arrive. It's no different than Safeway running out of apples -- actually there can be prolonged apple shortages at safeway, but there can be no prolonged cash shortages at a bank, since the bureau of engraving can print cash with much lower latency than farmers can grow more apples.
I know that. You know that. The bank manager knows that. The average retail banking customer who comes to a branch does not know that.
I still remember the lines at the WaMu branches, it was insane.
That was also the 1st time I heard of FDIC insurance caps. A lot of people lost a lot of money over that if I remember correctly.
Code is law. This law was just written incorrectly. This is a known risk; it's the reason why defi interest rates are similar to junk bonds.
Underbanked get hammered by fees with no safety net for emergency expenses. And large portions of our population get saddled with poor legal representation resulting in de facto indentured survitude in for-profit prisons.
Maybe if I built a defi lending platform myself so I could take a lot of loans from my customers and then default. That’d work just fine. Otherwise, run for the hills.
Until we find the API for reality, many of these decentralized projects are hopeless.
That was nicely put. I see so many of these projects promising to end with banking, bureaucracy, but forgetting that at some level the bits and bytes have to be input or acted on by a human.
Another question is if things like this will poison the well and scare people away permanently.
If you put up $X in FOO_COIN as collateral and FOO_COIN starts tanking in value, the contract is supposed to auto-liquidate once it hits a certain point. But there is absolutely no guarantee that this can find a buyer. So the "guaranteed" collateral recovery is not exactly guaranteed.
You can get upper-class rich, seven figures rich, comfortable house, vacation home, early retirement rich, but you can't get Private Jet Rich, Masters of the Universe Rich, Look At Me Rich.
If you want to be Rich you need to to resort to something like playing the lottery, or starting a unicorn startup, or exploiting large numbers of people for your own profit, or crazy "technically it's not a pyramid" schemes like crypto and DeFi.
SWE at the staff level will get you low to mid eight-figures rich [0] by the time you're old with safe, traditional investing. Sure you aren't Masters of the Universe Rich, but you're still filthy rich.
And how many crypto people are going to beat low-to-mid eight figures? Maybe if you put $100k into bitcoin in 2013, but I'd bet there are more SWEs making $500k+ than there are people who put that much into crypto early enough (and weren't already filthy rich).
[0] Low-to-mid eight-figures in today's dollars. Nine figures in future dollars. Assume $500k income, putting half away from 35 to 65, getting 7% (4.1% after 2.9% inflation).
Nobody should have the power that having a billion dollars gives you
The only thing to decide was if they would let the hacker get away with at the time 15% of the whole supply. If they did that it would have endangered the decentralization of the eventual proof-of-stake switch.
So the solution to save "decentralization" was for a centralized cabal to literally rewrite history?
Given that this incident resulted in the Ethereum/Ethereum Classic split, the "centralized cabal" was not very effective. The community voted with their feet and many went to Ethereum Classic.
So they decided to kill it outright?
The distribution of ETH was less decentralized before the hard fork than afterwards. 15% of the whole supply in one hand is quite a concentration in the distribution.
As far as the crypto itself is concerned, of course it is. The issue here is that the founder is using another system to blackmail users.
The fact that this founder had to resort to tactics like these (instead of reverting the mistake on his end) shows that these systems are working as advertised.
So from my point of view, you have this massive upfront cost, that I suspect the vast majority of teams are not paying, and you also have the chance of success being very low. Where have we seen this before, home automation seems to ring a bell and we've seen the security horror show with that. I don't mean to be such a downer on these projects, but they're really difficult to get right and audit. And when we're talking about putting millions(90!) of dollars into a thing, I don't really want to rely on the goodwill of some hackers to give me my money back. I wish the general public understood the security aspects of these contracts more, but people seem to see these hacks, shrug to themselves thinking they'll get debugged and fixed like normal software, and then continue on in life.
Unfortunately people are going to get burned in crypto by lack of experience, lack of review, lack of investment, and pure and simple scams.
https://github.com/openethereum/parity-ethereum/blame/4c3217...
https://blog.openzeppelin.com/on-the-parity-wallet-multisig-...
If you look at the associated pull request, it added over 2K lines of code, and removed almost 1K, spread across 20 different files. 5 files have changed so much, GitHub doesn't even show their diff by default.
It was reviewed by one person in a single day.
While DeFi can implement these kind of policies and procedures, the rate at which seemingly undertested (untested?) code is being deployed and given unfettered access to a large values of tokens definitely falls under the "move fast and break things" category. Clearly the people involved don't grasp the level of risks they're taking or there would be a heck of a lot more emphasis on QA over deployment-to-the-blockchain.
There's also the possibility that governments will actively ignore cryptos problems just to de-enforce crypto's utility.
If we’re comparing who “breaks” things more, crypto or banks, crypto will lose every single time. So far I’ve never had my bank account wiped out and the website replaced with a single page that says “penis”.
Not to mention, you have all sorts of people trying to exploit your code - draining smart contracts from money is a great incentive for black hats.
So it's even worse than JS in some aspects (not just the language itself, but the platform it is tied to).
EDIT: see https://ethernaut.openzeppelin.com/
The entire compound bug was apparently a typo, > instead of >=. No language can protect against logic errors like that.
The faster we ban all crypto nonsense the better.
Formal proofs might even make software worse since they lock down requirements; potentially in a sub-par way. Not to mention that requirements change. Good code needs to be able to handle changing requirements.
Far too much trust and too little control in systems like DeFi. It all sounds wonderful in theory but we fail to see the big impacts of human errors.
https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scan...
As for bank glitches, here are some recent ones:
https://eu.freep.com/story/money/2020/06/30/scams-glitches-s...
https://www.verdict.co.uk/chase-bank-accidentally-makes-man-...
Ultimately the entire market cap of Visa/MC/AmEx illustrate how much more we’re all paying over and above the just paying for the fraud directly.
Substitute tradition for "regulations" and you have "Uber of X" or "hot start up industry disruptor" in a nutshell.
In particular, it feels like much of the legal system is a bunch of hacks grafted onto existing (oftentimes much older) laws, and that there's an opportunity to rewrite the laws and merge the hacks in to form a cohesive whole.
Not to mention much of the time regulation is not a solution at all but rather just means to protect incumbents.
Edit: To be clear, I agree there is tons of bullshit going on in crypto and DeFi, but I also believe that the existing players are ripe for disruption if they weren't regulatory protected.
There's no reason why I shouldn't be able to do a bank transfer instantly, or why I can't pay a a small business electronically without a large fee going to Visa.
So they lost 1% of the total funds due to a bug.
And their solution was to threaten to dox the users.
E.g. the original goal of bitcoin was to be a digital form of cash. Cash because the transaction is just between you and the buyer - cash is a bearer instrument. With ACH it's a custodial relationship with the bank, and the bank's interest may not be aligned with yours. They can decline transactions, freeze your funds, monitor what you do, etc. So there was less "ownership", and this true ownership combined with digital payments was the original vision.
Except that true ownership is really limiting. Sometimes you want the intermediary or need money held in escrow and that's when you want a custodial relationship. So enters Etherium and the notion of contracts. Now it's no longer payer and payee, but you have the contract sitting between the two, much as the bank. And just as the bank, the contract can act against your interests. Now it's true, the specific ways that you get screwed by the smart contract are different than by the bank.
Next up, we are seeing the need for adjudication/rollback for when the custodians screw up, as people want to unwind errors in smart contracts or make policy changes. So this will be like re-inventing the court system. Soon, someone will be able to sue you and put a lien on your digital currency, using smart contracts, for example, with appeal to an adjuticating system that can force you to enter into the contract against your will. Then we will be back to longing for the days of bearer currencies.
Cavalier stuff like this will absolutely get you regulated. The draw of crypto is supposed to be immunity from this sort of thing, but the frequently amature execution of the products leaves end users often more vulnerable to attack than had they shoved their money in Bank of Your Nation. Banks invest eye-wateringly large sums of money every year in security. Crypto startups are just unable to match this level of security analysis and testing.
But the accessibility and costs will be massively superior to the old system, which will be unable to compete in anything but politics, and and thus will get worse rather than better, and will fail with near certainty.
Financial history is full of these moments.
You might be able to mine your way to anonymous funds, but that is even more expensive in terms of power and equipment costs.
That’s it?
Why would anyone ever lose confidence in a system that sent $90 million to users as a result of a “one-letter bug” in an "upgrade gone epically wrong"?
I really hope something much better replaces it. DeFi has so much potential but running on Solidity makes it high risk.
> “Keep 10% as a white-hat. Otherwise, it’s being reported as income to the IRS, and most of you are doxxed."
* Isn't the rule of crypto currencies and the like that the code is explicitly the contract, so if the code says to give people money then that is "legally" binding?
* Doesn't the IRS, etc still consider crypto currencies to be assets, not currency, so you'd only declare income on sale of the asset, not acquisition?
* unless core developers are adversely affected
All smart contracts are immutable, but some are more mutable than others.
The Ethereum community (technically, node operators) as a majority decided to rollback the blockchain and it would have been impossible to do so otherwise. The community was tiny barely three months after launch and this would be much harder to orchestrate today.
Good luck with your endeavours, Compound /s
edit: okay I see his followup tweet saying he wanted to act on behalf of the community and considered the prior tweet boneheaded. Just normal amateur hour with amateur founders in crypto.
I know it's fun to kick DeFi when it's down and make fun of "code is law" and the like but all of this leaves me with a very queasy feelings especially when the same comments praise our current financial system as if it has figured this all out and only idiots try to reinvent the wheel. All I can think of is 2008 and how all our financial institutions royally screwed us and almost no one went to jail and no one was held accountable (I think 1 person went to jail and they were a small fry).
Does the exact issue that happened here happen in our current systems? Yes, but it's fixable. That said, much worse things happen and they can be swept under the rug/ignored.
I don't put much faith in DeFi but I also put very little in "fiat"/"regular" financial institutions.