Some call it a way towards democracy. Other call is a scam, plain and sample. If anything, the DAO subject is polarizing and widely misunderstood.
The first thing we should know is that “DAO” stands for “Decentralized Autonomous Organizations”. You probably heard of the infamous “hacked DAO Project”, and understanding what happened is at the heart of controversy as we speak: where to draw the line of “decentralization”. Let’s get some context:
In 2016, a startup working on an a rather ambitious project. They called it ‘The DAO’.
The purpose was founding a “humanless venture capital” organization, where investors decisions are validated solely through smart contracts. As exciting as it sounds, the DAO -funded through a token sale- rose around USD 150 million dollars, with thousands of people contributing to it.
Shortly after the fundraising the project, “The DAO” was hacked and $50 million dollars worth of Ether disappeared. The attack was made possible by a flaw in The DAO software, not in the Ethereum platform. The developers and founders of Ethereum had no choice but to deal with the issue, and to honor the very essence of the project. A vote decided to retrieve the stolen funds through a hard fork: that’s the term for a change in the code. What does Vitalik Buterin think about it? During Money 20/20 held in Las Vegas NV, October 21st -24th, 2017, he said the following:
The aftermath of this is still in the heart of debate today. As a matter of fact, the decision implied obvious contradictions to the heart and soul of the Blockchain being irreversible and unchangeable. Obviously, the more hard forks used, the more the Blockchain would lose its main value proposition and claim (to be secure, anonymous, tamper proof & unchangeable).
But is there a better way to retrieve the stolen investor money, without clouding confidence in Ethereum? Where to draw the line?
It seems to me like a question for the philosophers…