In Defense of Human Interpretation in the Ethereum Economy and the DAO Hack
The most fascinating thing is happening right now in digital currency. The smartest technologists in the world built a decentralized but trustworthy system on which to move and trade digital money. This is called the Blockchain. Then they abstracted that system even more, and are using it to build political and economic entities. This is called Ethereum.
Let me repeat that. There is a decentralized online infrastructure that makes real-world political and economic entities. It is beyond the reach of governments, like say peer-to-peer file-sharing technology BitTorrent or PirateBay. Welcome to 2016.
One of these economic entities is a self-perpetuating investment machine, called the Decentralized Autonomous Organization (“DAO”). Whereas the United States has a Constitution that drives our principles and organization, the DAO is defined by code. It was just hacked for an equivalent of $70 million USD in value.
It was hacked through a bug in the code. There is a disagreement mechanism embedded in the DAO that allows someone to dissent and leave at a certain decision point. During this leaving, they can pull out their money. The bug allows a dissenter to fritz out the code and leave repeatedly, withdrawing the same money an infinite number of times. Oops.
The community is trying to put out this fire, and struggling with a philosophical choice usually made by a Federal Reserve of a country. But there is no Federal Reserve and there is no country. This is a collection of genius scientists, internet celebrities, libertarian lawyers, and hardnosed currency speculators. All excited about the possibility of the future, but also all from a similar social and gender slice across the world (generally male INTJs, of which I am one).
Students of law know that law is not deterministic, it is fuzzy. Decisions are “fact-dependent”, meaning that although rules exist, they are there primarily to be interpreted and applied to fact patterns. Instead of choosing a 0 or 1, we primates function in the grey area between. Thus Supreme Court justices argue about the Spirit of the law and the Letter of the law. It is a debate as old as the human world and is in the category of questions that have obvious answers.
For example, the US Congress makes typos in the written law all the time, as bills can span hundreds of pages. Judges can review drafting history and interpret typos out, rather than applying broken rules on their face, when these mistakes come up. See, judicial interpretation.
So why are we having a hissy-fit about removing a bug in code which is without question an exploit, and deleterious to both DAO investors and also the entire fragile experiment as a whole? Why are we ignoring the fact that regular investors in a civilized society must be protected? Why are we bypassing lessons learned from a thousand years of markets and governance?
The argument against correcting mistakes presuppose such a dog-eat-dog world, such an outdated “Buyer-beware” attitude, that in that case Ethereum and the DAO truly should be allowed to fail. Train cars used to smash workers’ limbs off until the interpreted law adapted to protect them — to think that was a better world is to invest in a philosophy that has been debunked for centuries.
Instead of relying on a flawed deterministic view of the world, where mathematicians and developers somehow create perfectly logical machines, we live in a fuzzy world where institutions evolve and must be flexible.
I recommend developers and thinkers look at how (1) legal practitioners actually apply deterministic rulesets and (2) consider developing technology able to implement fuzzy logic, like machine learning, to be self-correcting. OpenAI is a good example of the fact that machines must be designed in favor of human endeavor. Therefore, even our autonomous organization should simulate being Human, guided by continued and vigilant guidance, jurisprudence and interpretation.
Disclosure: I am not a Bitcoin, Blockchain or Ethereum technologist. I have some legal education but do not practice law, and work in money management but do not provide investment advice. However, I am philosophically aligned with the success of a project that can help billions of people have access to financial success and fulfillment. The world is watching our work, let’s take care of that responsibility - DAOhub ethereum.
