“I think they’re trying to patch up the side of the Titanic.”
So says Charles Hoskinson, the former CEO of the ethereum project when asked about the ongoing crisis surrounding The DAO, the ethereum-based funding vehicle that collapsed last week after a debilitating code exploit. Though he’s since moved on to a new project in the industry, Hoskinson was among a limited number of fiduciaries for ethereum before departing in mid-2014 over a disagreement about how the project should be structured.
At issue, according to Hoskinson, was his desire for ethereum to form a VC-backed entity to develop the protocol, and then to use a non-profit organization to launch a crowdsale afterwards. However, Hoskinson said project participants moved forward with the creation of the Switzerland-based Ethereum Foundation, and he soon departed.
Now, Hoskinson says he disagrees again with how that organization, as well as Slock.it, a Germany-based startup that authored code for The DAO, are moving forward to save the troubled project. Hoskinson said the decisions made by the two groups are driven by “greed and arrogance”, adding that the Ethereum Foundation should not have become involved in the situation in the first place.
Since the hack, members of the Foundation have moved to develop what could ultimately constitute a fork or rule change of the ethereum network, though this has yet to be decided.
“The Foundation should not have gotten involved, or had its officers get involved. It was a clear conflict of interest,” said Hoskinson, adding:
“They picked winners and put themselves in a situation to benefit from it.”
Pyrrhic hope
Hoskinson went on to argue that Slock.it failed to properly vet its work, and that as a result, this both imperiled the funds that had been invested and implicated other members of the ethereum community.
He added that he believes the situation could ultimately spark class-action lawsuits.
He told CoinDesk:
“They instead rushed into an unproven model, chained everyone’s brand to it and then tried to hype the hell out of unaudited code for an experiment. Now, the Foundation has to try to clean up the mess with some Pyrrhic hope that they can avoid legal concerns.”
The DAO launched earlier this year with a mission to allow people who purchased voting tokens with ether to cast votes on how they wanted collective resources to be spent.
Still, as a result of initial enthusiasm in the idea, over 23,000 people invested more $150m in the effort before the vulnerabilties in the code resulted in the loss of a significant amount of the funds.
Knee-jerk response
Hoskinson said that he believes the response to the DAO exploit by the Ethereum development community should have shown more restraint in the immediate aftermath.
“[Ethereum creator Vitalik Buterin] made a rookie mistake. The very first thing you do is stall productively. You acknowledge there is a problem, set a date to provide more info and turtle up for 48 hours,” he said.
A better path, he said, would have involved working actively with stakeholders, exchange operators and other members of the Ethereum community to jointly develop a solution to be presented in a concerted effort.
“Simply knee jerk ‘we are going to fork’ isn’t a good call,” said Hoskinson. “Even if you end up doing it, you need consensus from the community.”
Hoskinson’s new firm, IOHK, specializes in building cryptocurrencies and blockchains for academics, governments and businesses. He said the company has 27 employees and 12 cryptographers.
Image via Charles Hoskinson
Correction: This article has been updated to correct a statement by Hoskinson about early discussions about structuring the Ethereum project.