Besides the obvious fact that the owner of the company that created it had no experience in Finance Software Development, previously working in marketing/PR.
The public appearance of the Slockit team who made it was purely marketing. Everything they output lacks any real details or substance and when anyone ever talked about this they would react badly. Often with really arrogant or accusatory outbursts.
Their main concept is basically a smart lock that uses a raspberry pi and Ethereum to unlock doors based on money sent to a smart contract. Lets ignore that this concept does not require Ethereum and that changing a variable in a contract from a 1 to a 0 and having a raspberry pi short poll that and open a lock is not revolutionary or interesting. And lets ignore the massive security holes, from both regulations on doors and the fact that the contract could be gamed if the items in the house value more than the cost to open the door since interaction is anonymous.
The point that makes them reek of being a scam is their plan to fund this idea.
They seem to take credit for the entire distributed autonomous organization concept despite several already existing. They put out a white paper called "The DAO model" basically suggesting a DAO should only function as a investment group but in a way it had limited control and limited recourse if something went wrong. Then they had the audacity to name their DAO "The DAO".
The contract allowed for a group of people to pool their money into a single contract then elect a custodian, or rather a company to take those funds and use them, profit not arbitrarily taken by the company is given back to the DAO to reward investors.
To avoid legal responsibility they did not release this contract themselves, they made it open source and said that someone else would have to start it and begin the process of funding it, despite them making the marketing material including the website.
It was released, they marketed it and the idea was that they would become the first custodian of the money, taking whatever number of millions without selling a single share in the company and being able to dictate how much they give back. If they failed there would be literally no repercussion. The fact that anyone thought this was a good arrangement is absurd.
Many people including myself asked why there was not an upper limit on investments, their answer was that since you could split off from the original DAO. There did not need to be an upper limit so no one could buy 51% and steal the rest. This "feature" was the vector for the attack on the DAO.
The code was an embarrassment, with many common mistakes made by amateur programmers who have no experience working with money. For example, they incremented after doing the call function to transfer money.
When people did report issues to them, they ignored them and then made claims they did not affect them.
The ETH Foundation then used their own resources to promote the DAO. Both project founders and others were made "curators" who would vet the code of incoming proposals (one left quite quickly). Many of the ETH Foundation members invested in the DAO.
The first generation of this code, 1.0, with no prior testing was released and funded with 150,000,000 dollars.
Nothing in this explanation of terms or in any other document or communication may modify or add any additional obligations or guarantees beyond those set forth in The DAO’s code. Any and all explanatory terms or descriptions are merely offered for educational purposes and do not supercede or modify the express terms of The DAO’s code set forth on the blockchain; to the extent you believe there to be any conflict or discrepancy between the descriptions offered here and the functionality of The DAO’s code at 0xbb9bc244d798123fde783fcc1c72d3bb8c189413, The DAO’s code controls and sets forth all terms of The DAO Creation.
Then it fell apart because a loophole was found.
Firstly I'm a bit confused. I interpreted your initial comment as saying that it was a bad idea for the Ethereum protocol developer to hold $115k DAO tokens, but now I get the sense that you were saying the DAO, as a whole, was a bad idea. Could you just clarify which it is?
Secondly, I get the sense that you're making two types of claims: a) claims of incompetence on the part of the DAO/ETH team (which seems to be the general consensus) and b) claims of fraudulent malevolence.
As a layman, I'm interested in getting a better picture of the latter. Couldn't this "just" be a case of shoddy craftsmanship and absence of due diligence on the part of investors? I apologize, but I don't see the scam per se. Please be aware that I'm only superficially familiar with smart-contract technology.
The developer who works on the protocol should have known better and also read the code.
I also personally think that anyone working on the protocol should not be holding securities that the non profit foundation they work for is promoting. And they should then not be using those non profit funds to change the fundamental principals that were advertised to raise the funds.
The whole situation is a mess
* Would the software developers suck it up and follow the miners?
* Would the pool of software developers shrink because various developers do not find implementing the will of the miners to be an enjoyable hobby and/or job anymore?
* Would the miners hire new software developers to replace the ones that leave?
* Would there be a fork?
I don't know, but pretending that "the protocol is decentralised, the technology is completely agnostic to anything but the will of the majority" is ignoring the realpolitik of this kind of situation.
Saying that Ethereum implements the will of the majority is like saying American democracy implements the will of the majority. Sort of? But meanwhile there are a lot of empirical studies [0] demonstrating that the will of the people has little to no influence over American public policy. A democratic financial system is much more corruptible than a democratic political system.
[0] https://scholar.princeton.edu/sites/default/files/mgilens/fi...
By only saying that the problems will sort themselves out because a census controls the network doesn't address the other factors that can be influencing the decisions of the majority. Essentially a census-controlled network isn't infallible (i.e. bitcoin block size debate).
No one can come out and say, "We must change bitcoin. You should follow me because I created it."
By removing the founder role, Bitcoin is just that much more decentralized.
If the miners freely agree to accept a fork, were they really free in their decision or did they do it because of peer-pressure or because humans like to preserve groups more than anything else?
On the other hand: What would need to happen to "prove" independency of the organization?
Yes, just like a constitution. System architecture (political or otherwise) can not save mankind from the failings (of a subset) of itself.
Since miners are in for the money, usually they don't care about anything else as we see from other cryptocurrencies.
Also, don't mistake consensus of miners to consensus of users of the network, which is the biggest problem with most cryptocurrencies (BTS did well on that part).
http://tendermint.com/blog/on-thedao-and-blockchain-governan...
So the miners do have quite a bit of say. Depends on what your strategy for hard-forking the PoW algo is. Or, you need to understand PoS.
It's in the blog post. Read it :P
In my defense, I've spent a lot of time on /r/ethereum where a lot of people think that 51% of miners are capable of changing the protocol.
Could you elaborate on the issue, I take it you're referring to this
> In a proof-of-work blockchain, nobody rational would follow a fork with less than 50% of the mining power behind it because it would be vulnerable to attack by anonymous miners unless there were also a change in the hashing algorithm that required an investment in different kinds of hardware.
But let's say we have Chain A with 51% and Chain B with 49%. If the miners on Chain A want to attack Chain B, they'd have to move their computing power onto Chain B. In which case the miners from Chain B, could attack Chain A while they're busy doing their attack on Chain B.
In the end, it would be MAD (mutually assured destruction) unless the miners from one chain had enough to defend theirs while attacking the other. For that you'd need at least 66.6(repeating, of course)% miners on Chain A with half of those able and willing to perform an attack on Chain B.
I think this would be hard to achieve.
pro A: 51% pro B: 49%
If B miners move to attack A, it means B will be successfully double-spent sooner. I'm not sure how best to coordinate the attack vs defense, but pretty sure ultimately the majority would win out. And yes, there is mutual destruction in play.
This is less of an issue with say, 67% and 33%.
Anyways, I also argue that there's only room for 1 secure PoW blockchain, and that's basically Bitcoin.
I read your blog post, but I didn't see where you mentioned that, so it's a little hard to argue with. I do disagree, however.
But you do make a good point, miners are centric to the platform. However, they have to all agree in order to make their opinion matter. Which requires a very strong opposition to the hard fork, in this case the hard fork is the best option so they'll agree either ways.
This simply is not true.
The hard protocol rules _define_ who is and who isn't a miner. If you violate the rules the system's participants are enforcing, you're not a miner anymore as far as the protocol is concerned.
A minority-miner pow-chain quickly loses credibility. If say a 67% coalition of miners say that a hard-fork will not happen, then the 33% coalition of miners are in a bind, even if the exchanges choose to support the 33% -- which they won't, because it's too vulnerable to double-spend attacks.
Ergo, the minority-miner pow-chain must either also hard-fork the mining algorithm (to require investment in new hardware), or hard-fork to a non-PoW system.
I do understand your definition of a hard-fork. What I'm talking about is a protocol-extrinsic, cryptoeconomic justification of my argument. There's a game of chicken involved, for example.
The only way I see to accept both arguments is to assume that miners are all highly technical while your current average users are not, but that seems like a stretch to me. The truth is that miners run the software that they think is most likely to benefit them financially and that is the one that is being championed by the biggest public faces of the community.
Isn't it a bit ironic to ask for disclosure, when one of the main reasons for cryptocurrencies to exist is their pseudonymity?
Kind of like a libertarian asking the police to investigate one of her bodyguard mercenaries.
They raised money for this non profit by advertising a specific kind of software that is immutable. But because some wealthy investors (including themselves) lost money in the security built on their software. They are using that raised money to make the immutable software mutable.
https://www.reddit.com/r/TheDao/comments/4j6nv7/you_have_bee...
http://ethdocs.org/en/latest/introduction/foundation.html
Why don't you google shit before sharing your uninformed opinion? Especially when suggesting I'm spreading "fear uncertainty and doubt" like we are at war, dick.
They are public figures who write blog posts too and have used that blog to promote theDAO, a security which they were invested in. Its cut and dry corruption.
>Why don't you google shit before sharing your uninformed opinion?
some good advice there genius.
But we need to know who has what stake in these decisions and be able to evaluate how that may influence their opinion.