Fear Is The Mind-Killer

  1. A project called The DAO launched in an attempt to be the first real decentralised autonomous organisation running an Ethereum protocol VC fund.
  2. Users staked ETH into the DAO smart contract, and in return they could vote on how the pooled funds would be invested into promising projects.
  3. The DAO attracted approx. $150m worth of ETH at the time, which made it one of the largest crowdfunding campaigns in human history.
  4. A bug in the smart contract allowed an entity to drain the funds from the DAO. I object to calling this hacking; the contract performed as written. The problem was that the DAO creators did not fully understand how their smart contract would perform in the wild.
  5. The Ethereum community loosely– led by Vitalik– had a very stark choice to make: A) Allow the DAO funds to be drained, but uphold the immutability of the blockchain. This would have made Ether more akin to a hard monetary instrument, but given the nascent stage of the Dapp ecosystem in 2016, it would have dented the enthusiasm of investors to participate in future DeFi projects because of the losses they sustained.
    B) Push for the miners to accept a hard-fork which would roll back the Ethereum blockchain to before the DAO was exploited and allow investors to recover their ETH. This makes Ether a poor monetary instrument because history can be re-written under duress, but it would give confidence to investors to continue experimenting with DeFi applications.
  6. The community, true to the actual mission, chose advancing Ethereum’s position as a decentralised computer over being a true monetary instrument.
  7. This decision upset a lot of community members who valued immutability above all else, so after the hard-fork they continued mining the original chain but changed the name to Ethereum Classic (ETC). It has the same community commitment to acting like hard money as Bitcoin, and the same smart contract logic of Ethereum.

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Co-Founder of 100x. Trading and crypto enthusiast. Focused on helping spread financial literacy and educate investors.

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Arthur Hayes

Arthur Hayes

Co-Founder of 100x. Trading and crypto enthusiast. Focused on helping spread financial literacy and educate investors.

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