Amidst all of the buzz about the hacking of the DAO and the consequences for Ethereum, everyone seems to be missing the most crucial point of all.

The Ethereum Foundation stated quickly on its website that they identifed and effectively froze the hacker’s account. Also, Stephan Tual (the founder of Slock.It, the group that created the DAO) said:

“All stolen funds will be retrieved from the attacker.”

Now if you change the “will” to “can” in that sentence you get an interesting and crucial new reality:

“All stolen funds can be retrieved from the attacker.”

No other financial system ever has been able to make that claim.

The point is that peer-to-peer validation systems that store history well can provide a mechanism for reversion. In other words, a damaged system can immediately revert to a state from before the damage occurred! (wiki much?)

In the case of currencies, this is a huge win for the user-base of any currency. In the case of other distributed systems, the same is true.

Moreover, this is an example of a more general property of panarchy and the peer-to-peer future as a whole, that stems from understanding of complex systems. Some complex systems are not only resilient to certain kinds of attacks, but but actually improve as a result of disruptions! Popular scholar and author Nassim Taleb coined the term “antifragile” (his book, “Antifragile”) to refer to this phenomenon:

“The resilient resists shocks and stays the same; the anti-fragile gets better”.

While there are still ongoing, and healthy, debates about the response and the solution, they will invariably leaded to a wide variety of technological implementations, some of which will be adopted as improvements to the alternative economy as a system. It can be argued that this kind of evolution also happens in the currently dominant financial system of banks, etc., but that current system is run by elites with very private agendas. By contrast, the alternative peer-to-peer panarchical economy is, a system we can celebrate because it includes a global community of interested and motivated participants and makers.

In other words, there is no need for a huge financial bailout which incurs enourmous economic costs and does little to alleviate the actual damage done or to improve the future situation. Ethereum (and any other systems we develop) can be changed by us simply by getting more involved and saying “We think this needs to be done differently.”

You certainly won’t get far trying that at your bank.

Further Reading:

2 Comments Why the Ethereum/DAO Hack Proves They Are Better Than Banks

  1. Michael Lewis

    Can’t say I understand it all Paul but your point is fascinating – from resilience to anti-fragility. If what you say about their claim turns out to be the case, and I know nothing to be able to assess it, it is indeed a curious tech. feature which will give rise to much reflection as we persist in our efforts to figure out pathways out of our collective mess.

  2. Alan Graham

    If your main selling point, in their words is:

    “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.”

    And all of a sudden one single smart contract brings the entire system to a halt by a third party, effectively censoring the “hacker” because of a possible fraud, you have proven your system is flawed.

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