To Fork or Not to Fork?

On November 7th news broke that Parity had another bug in their multi-sig wallet. Only a few months ago a vulnerability in their multi-sig contract code led an attacker to steal 150k ETH (or 30m in USD) and put another 70m USD at risk. Now there was another vulnerability that enabled anyone to destroy the source contract of the multi-sig wallet, leaving all multi-sig wallets created after July 20th in a state where funds can’t be moved. This affects roughly 550k Eth or 160m USD. The Polkadot project with its recent ICO has roughly 90m USD locked up alone.

Every incident of this kind brings up a deeply rooted conflict in the community about governance and forking that spawned with the DAO fiasco.

The DAO fork

The DAO (Decentralized Autonomous Organization) was the first big Ethereum project, basically a community managed investment fund. It attracted about 10% of all existing ether at that time, 150m USD’s worth. An attacker managed to drain the funds but the withdrawal mechanism gave the community time to react. Within hours Vitalik and other foundation members rushed to help, first creating a soft fork proposal that failed hours before release and finally coming up with a hard fork solution to return funds to the rightful owners.
The resolution and the involvement of foundation members was highly controversial and it still is up until today. Just like today this was not an issue of the Ethereum platform directly, but a separate project built on Ethereum.

Taking sides

Now I want to go over the most important arguments of both sides trying to be as objective as possible. One side wants to fork Ethereum and return access to funds to the wallet owners, the other side doesn’t want any interference with the blockchain history.

The Pro Fork Side

1. The forker’s central argument is that Humans > Code. If over 51% of the community agree that a fork to rewrite blockchain history is correct, then it is correct. Humans rule over the laws of the blockchain and not the other way around.

2. Not reimbursing wallet owners would send a fatal signal to new investors — “your money isn’t safe”. In the worst case the government could step in, potential law suits against Parity or others might follow. Instead the community could practice self regulation and show the world how a decentralised community can function.

3. Without a fork mainstream media would pick up the issue and create a lot of bad press. This would ultimately hurt the whole Ethereum ecosystem and all investors. And it could all be avoided with a simple fork.

4. Lastly, doing the morally right thing discourages malicious behaviour. While this was not a hack but an accidental invocation of a bug, it still sends the signal that attacking the Ethereum system is not worth it and that the community will step up to make it right.

The No Fork Side

1. The no-forker’s central argument is that “Code is the law”. If we randomly decide to rollback transactions whenever a big player gets burnt, we’re heading straight down the path of censorship and centralization. A crucial advantage of the blockchain is immutability and every fork that rolls back transactions ridicules this unique attribute of the blockchain.
2. No-forkers say that The DAO was a“bailing out the banks” scenario. Every time a big player makes a mistake we apply the “too big to fail” logic that rules the traditional monetary system. A system most of the crypto community is opposed to.
3. If we fork for a big enough mistake it poses the question of where to draw the line. Did The DAO fork get foundation support because founders’ money was involved? If the Parity fork happens, is it because the company was founded by Gavin Wood, an Ethereum founder? Why didn’t we fork for non-foundation related hacks (there were enough)?
   Non-forkers want simple rules and to adhere to them. They object to this extra layer of politics of Ethereum as they believe it will cripple the project in the long run.
4. From an investors standpoint they consider the loss a positive impact since the circulating supply of Ether just shrunk which benefits all investors.

TL;DR:

To summarise this I believe both sides have the best intention for the Ethereum project, but one side is more pragmatic and wants to embrace the human factor in computing.

The other side argues from an ideological standpoint where we shouldn’t mess up the blockchain with politics.

Further implications

Parity is done. Their community’s credibility went below 0 after two massive fuck ups within a few months. While I understand this sentiment, I would like to point out that their Ethereum node is one of the best nodes out there and not all that comes out of their doors is buggy and horrible.

However, they have unearthed probably the biggest problem of Ethereum once again: Writing secure, bug free smart contracts is really hard. If an Ethereum founder can’t even do it, who can?

Also they put the Ethereum foundation in a state of dilemma. Parts of the community shout for foundation help. The DAO created a precedence with the foundation rushing to help, now the community has its eyes on Vitalik and co. If they help with a fork to recover funds, the argument of centralization and censorship will arise once again.

If they don’t they’ll have to deal with the claim that they just saved the DAO because they invested in it personally. Neither of those arguments are totally objective or fair but they are a direct outcome of their involvement with the DAO fork. Vitalik already came forward stating that he will not get involved with working on the fork.

What I think is going to happen

Since the foundation did not step forward to offer their help publicly and the lost funds are no systemic threat to the Ethereum project, I do not expect a fork to happen. The market did not react too strongly to the news, so the Ethereum price getting dragged down in the long run is unlikely.

Another slightly less likely possibility in my eyes is that a fix to the issue will be included in the next planned Ethereum Fork - Constantinople - to recover the funds. I think this would be the healthiest decision for the Ethereum ecosystem as it reassures investors, although from an ideological standpoint I personally don’t support it.

What do you think?

If you believe that my arguments are misleading or don’t hit the point, or you have other points that I missed, I would be happy if you drop me a comment!