Ethereum’s $150 Million Blockchain DAO Fund Opens To Critical Analysis by Security Experts

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Three members of Hacking Distributed – Dino Mark, Vlad Zamfir and Emin Gün Sirer just released the first draft of a research paper that analyzed The DAO and its voting mechanism. This paper identifies problems with The DAO’s mechanism design that incentivise investors to behave strategically – that is, at odds with truthful voting on their preferences and then outline potential attacks against The DAO made possible by these behaviors.

In particular, we have identified seven causes for concern that can cause DAO participants to engage in strategic behaviors. Some of these behaviors can cause honest DAO investors to have their investments hijacked or committed to proposals against their interest and intent.

These concerns motivate a moratorium on funding proposals to prevent losses due to poor mechanism design. A moratorium would give The DAO time to make critical security upgrades. We encourage the community to adopt a moratorium until The DAO can be updated.

For expediency, we skip the background on The DAO and its mechanisms and jump right into the attacks. A primer on The DAO’s operation can be found in the full paper.

The funding closed yesterday on The DAO – a kind of cross between Kickstarter and a VC fund which runs autonomously with no human input on the Ethereum platform. The DAO (short for decentralized autonomous organization) raised over US $150 million worth of Ether, during the 27-day sale.

The DAO is basically an investment vehicle governed by a program, directed by investors’ votes, to seek out and fund proposals. Implemented as a smart contract on the Ethereum Blockchain, The DAO  raised 11.5 million Ether, which makes it the largest crowd-funding event in history. The DAO now controls 16 per cent of the total supply of Ether. 

About Richard Kastelein

Founder, Publisher and Editor in Chief of industry leading online publication, Blockchain News and co-founder and director at Blockchain Partners in London/Amsterdam/NYC. Kastelein is also an advisor with a number Blockchain startups doing ICOs including Humaniq.co where hs is interim CMO, DECENT.ch, Inchain, Chronobank, eGaas and others. He is regarded as one of the top journalists by the Blockchain and fintech communities – as is evident by his entry in the Top 150 Fintech journalists online and in the top 10 of the Blockchain Top 100 List.

As a prominent keynote presenter, he has spoken on Blockchain at events in Gdansk, Amsterdam, Minsk, Dubai, Antwerp, Eindhoven, Bucharest, Nairobi, Tel Aviv, Manchester, Brussels, Barcelona etc, where he helped spread the cause for Blockchain technology and cryptocurrency and, consequently, has built a notable network in the scene.

He’s also a director of a Dutch foundation called The Hackitarians and has run innovation events in London, San Francisco, Berlin, Amsterdam and other cities around the world on topics such Blockchain, Health, Energy, Internet of Things, AI etc.

In 2013, the European Commission appointed him as an expert for overseeing financing for emerging startups as a part of the European Commission’s 90 billion euro Horizon 2020 project, created in Brussels to promote innovation as a driving force of job creation and business ventures across Europe. He has also worked as an external expert for Innovate UK since 2012, judging startups for the UK government.

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