> When a smart contract goes wrong, there are no fallbacks.

Like others have suggested, there is a fallback just like in other systems, it's just not formalized - yet. The difference is that in government there must always be a fallback , while smart contracts leave open a possibility that in the future, with an ideally unhackable contract, the fallback can potentially be removed.

> When a smart contract goes wrong, there are no fallbacks.

Sure there is. As the DAO hack showed us, if you can get enough of the network to agree to it, you can literally rewrite history and create an alternate universe where the contract never went wrong.

I've heard this argument before and was wondering how it can be considered ok:

1) hacker steals massive amount of money from a crypto wallet

2) hacker cashes out and gets real money

3) network realizes the hack and "rewrites history" as if "the contract never went wrong"

How is this a valid outcome? Somebody in here is out a large amount of real money.

The whole reason the DAO hard fork worked was because the funds were locked until a certain date. The hackers couldn't access them until after that date, so the hard fork before that date resulted in no hacked ETH being traded for USD (or anything else).

Actually, if I understand correctly, the hard fork could still have been done even if the funds weren't locked up. It's just that then it might not have been the hacker getting the short end of the stick, but rather whoever was unlucky enough to take their ETH in exchange for some other currency.

The hard fork may have been considered unfair by more people if the funds had not been locked, but the point still stands that if you could get enough of the network to agree with you, you can fork and start over at any block in the past you want.

so, essentially there are no fallbacks. Unless you want to break one of the core founding values of cryptocurrency.