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An Open Letter (The DAO Attacker)

257 points by arekkas 10y ago

drinchev 10y ago
Touché What the attacker claims seems reasonable.
carlchenet 10y ago
haha it's unavoidable they're going to sue him. But he seems ready :)
- Draiken 10y ago
  Ready and with $50M to defend himself? I have no idea how you get actual money out of it, but if he does get it, that's a lot of money for lawyers...
- Kristine1975 10y ago
  Wouldn't they have to find out his/her real identity first?
sintaxi 10y ago
Well played.
iamben 10y ago
So that's just over 50 million dollars?
- nilved 10y ago
  50 million Internet dollars. He needs to sell them for real dollars, I believe.
  - midnitewarrior 10y ago
    He knew what he was doing, and when it would be done. If you know this, you can short the currency and make a mint without spending the stolen currency.
taspeotis 10y ago
I assume this is fake. To me, it doesn't follow that forking Ethereum to change it's behaviour would constitute "seizure of ... ether". There's no law to stop the Ethereum Foundation from changing their software protocol in arbitrary ways. It's theirs, they can do what they want. There's money involved, but in that case it's similar to the scenario if Supercell decided to remove IAP from Clash of Clans and users couldn't use their gems.
- jacquesm 10y ago
  It could be a fake, but that has no bearing on whether or not what is written there is factually correct. Judge the document contents on their merits or lack thereof, not by their provenance.
- julian_1 10y ago
  > There's no law to stop the Ethereum Foundation from changing their software protocol in arbitrary ways. tortious interference with a contract. https://en.wikipedia.org/wiki/Tortious_interference https://en.wikipedia.org/wiki/Tortious_interference
zby 10y ago
It is signed - has anyone checked the signature?
- curiousgal 10y ago
  It's useless unless you know who signed it; have a public key. Fake. The real "hacker" made millions shorting ETH before the attack.
  - robk 10y ago
    I'm curious where one could actually place this volume of short sales on ETH if true.
    - curiousgal 10y ago
      Exchanges deal with a great amount of volume. https://mobile.twitter.com/EthereumWiki/status/743905989682855936 https://mobile.twitter.com/EthereumWiki/status/7439059896828...
  - cheez 10y ago
    This is actually brilliant and is almost a no lose situation. * Outcome 1: ETH is forked -> ETH value goes to 0, the shorted currency is pure profit minus interest * Outcome 2: ETH is not forked -> Hacker gets $50 million These are only the technical outcomes but the only social outcome I can see is a lot of suing going on. My suspicion is that it is unlikely that anyone will succeed in a legal challenge, but I'm not a lawyer.
    - curiousgal 10y ago
      Of course legal challenge won't be fruitful. In the eyes of the law using an exploit on an vulnerability found in a contract will still be interpreted as malicious or even criminal and thus illegal,
      - julian_1 10y ago
jackgavigan 10y ago
Setting aside the question of whether the letter is genuine, the attacker is perfectly free to enjoy the ether he stole. However, the rest of us are also perfectly free to adopt a fork if we wish.
- jacquesm 10y ago
  Yes, but that would be breach of contract.
  - mbrock 10y ago
    Can you clarify who would be breaching which contract?
    - jacquesm 10y ago
      The attackers claim (assuming that's who wrote the message) that he merely took advantage of the contract as written is at first reading a plausible one. To change a contract after it has been written and executed and to try to 'undo' a done deal based on actions the contract and its context fairly explicitly ruled out prior to the execution would seem to me to be against both the letter and the spirit of the contract. I get why everybody is upset, but this was pretty much bound to happen. Security of this kind is an all-or-nothing item, you have to get it 100% right or it might just as well not happen at all. So all this backpedaling and fixing does absolutely nothing in my view to strengthen the concept. The only way forward would be to declare this version a total loss and to do a reboot with a better core and then to see how long that one will stand up. Rinse and repeat until one really stands (by then confidence will likely be quite low) and accept that it could still go down at any point in the future. A bit like the Monty Python sketch about the castle built on swampland. Anything less will not do, either the contract is all there is or it is pointless.
      - jackgavigan 10y ago
        Well, the attacker is welcome to try to get a UK court to injunct me against adopting a fork. How far do you think he'll get with that?
matt_morgan 10y ago
One important point here, whether the letter is genuinely from the attacker or not, is the nice summary, in "showing not telling" fashion, of the issue here: if the "The DAO’s code controls and sets forth all terms of The DAO Creation," and the way to undo/mitigate what happened (forking) undermines trust in Ethereum, then we're between a rock and a hard place. I.e., I'd just like to call out the efficient and compelling rhetoric this letter represents.
- unixhero 10y ago
  Yeah, I thought so too. The truly orthogonal logic and arguments used in the letter are excellent.
- crazydoggers 10y ago
  The rhetoric of the letter falls flat to me. It misses the point that the "contract" is also code, and contained a legitimate bug. Exploitation of that bug in most places would be a crime. If I figure out that an ATM spits out hundred dollar bills every time I type in a certain pin, that's a crime. I don't get to make the claim that I was rightfully using the ATM. The quote that "The DAO’s code controls and sets forth all terms of The DAO Creation" is a disclaimer that is meant to protect the DAO from those who would seek to imply some sort of guarantee or warranty from the organization. In other words if the attacker makes off with the funds, and the DAO decides to keep the code as is, then as an investor I have no recourse against the DAO. Ultimately the letter misses the main point. The DAO token holders are free to amend the contract code as they see fit thru consensus. The disclaimer never states the contract can't change. And even if it did, the idea that their would be some legal recourse for the attacker, should the community decide to fork, is hilarious. So the letter comes across to me as something an immature troller would write. I'd be suprised if most sophisticated DAO token holders took it seriously.
  - achr2 10y ago
    But they so explicitly point to the code as the source of truth for the contract. Banking and trading firms use teams of lawyers to find loopholes in contracts and laws all the time. Why would digital contracts (code) not have the same level of scrutiny / unscrupulous behaviour? Guaranteed if big money is at play in the system non-code based exploits will be used by firms just as often.
sgentle 10y ago
I find this whole situation has an interesting parallel to international law. Unlike other kinds of law that are backed by the power of individual states, international law exists in this weird zone where it's kind of law, but kind of also the United States can do whatever they want because they own all the aircraft carriers and what are you going to do about it punk? That's why it's funny to see Sealand, Hutt River Province, Liberland and other nation-hacking experiments say things like "The Law says this is our nation!". The law is an illusion that exists only in the shade of power, specifically power to provide enforcement. That illusion just doesn't work on the world stage. Any sufficiently powerful actual nation could come and take your island and no other nation would bat an eye. The only reason they don't is because it usually doesn't matter enough to even be worth the bad press. Ultimately, The illusion of law in Ethereum is implemented on top of the power of the miners involved. The miners can and possibly will eradicate The Attacker's carefully grifted money if it suits their interests. Power trumps law. This open letter is being written for two reasons: firstly, the power of the miners can be swayed by appealing to their ideals. Secondly, because this whole virtual legal playpen is still subject to real-world laws and, thus, state power. It's fascinating to see how quickly this smart contract experiment has turned into a struggle between these multiple levels of political power, with really nothing at all to do with the letter of the law as laid out in the contract. Well worth the price of admission, in my opinion.
- toyg 10y ago
  > this weird zone where it's kind of law, but kind of also the United States can do whatever they want because they own all the aircraft carriers and what are you going to do about it punk? That definition should go on university books, seriously. A lot of what we talk about when we discuss "international law" is a contorted way of making this or that nation prominence as morally justified. > and no other nation would bat an eye ... however, this is a bit too cynical. The UK definitely did "bat an eye" when Hitler seized Gdańsk/Danzig. Russia is currently under sanctions after its Crimea annexation. Just because we don't constantly respond to crisis with full military force, it doesn't mean that we don't care. I personally don't see the equivalence between this situation and international law, because this can really be resolved by a higher power (the State), if necessary by suppressing ethereum altogether. In international relations, there is simply no higher power.
arisAlexis 10y ago
I like this guy
curiousgal 10y ago
A fork doesn't deprive the hacker of anything. In a fork scenario, the hacker keeps 100% of the Ether he obtained, without interference. Every smart contract has been honored in full. It's just that everyone else has decided to start using a new cryptocurrency.
- martinko 10y ago
  So much for confidence in future smart contracts in ethereum. You have invested in an experimental 'organization' that is defined by the contract that is its code. The code supersedes any other interpretation of the contract. You have agreed to this. Now something didn't go the way you wanted it to, yet fully in line with the code, and you want to fork the entire currency to steal this 'attacker's' property. Good luck with your fork, it will mark the official end of ethereum.
  - adekok 10y ago
    > You have invested in an experimental 'organization' that is defined by the contract that is its code. Greed trumps contracts.
- appleflaxen 10y ago
  I think this is a really fascinating and smart argument. But I think it loses some power when the currency is still called "ethereum", and administered by some of the same individuals who created the DAO. Who knows what a court would think
- operative11 10y ago
  Aye! Indeed!
0x006A 10y ago
signature fails to validate here: $ helpeth verifySig 0xaf9e302a664122389d17ee0fa4394d0c24c33236143c1f26faed97ebbd017d0e 0x5f91152a2382b4acfdbfe8ad3c6c8cde45f73f6147d39b072c81637fe81006061603908f692dc15a1b6ead217785cf5e07fb496708d129645f3370a28922136a32 Message hash (keccak): 0xaf9e302a664122389d17ee0fa4394d0c24c33236143c1f26faed97ebbd017d0e node_modules/helpeth/node_modules/ethereumjs-util/index.js:403 throw new Error('Invalid signature v value')
- Bombthecat 10y ago
  Japp, troll.
pjhumble 10y ago
Many legitimate companies take advantage of poorly written contracts for monetary gain. The terms state the DAO's code is the contract. It's just as if he was a lawyer or analyst, who did his due diligence, carefully reading the contract and finding a (legal) loophole. English may be imprecise, and a paper contract could be challenged in a courtroom, but with smart contracts, there is no need for a court, since the contracts are governed by the laws of physics (the VM). When the stakes are real and consequences real, more money and smart people will be attracted to the platform, and over time smart contracts will become more robust. Without real consequences, what is the incentive to participate if the rules can change when they don’t always go in your favor?
- heisenbit 10y ago
  Yes, wording can be twisted. But the other side can mount the legal argument that this was not the meaning of the original contract. From http://apps.americanbar.org/litigation/committees/trialevidence/articles/spring2014-0614-demise-meeting-of-minds-contract-law.html http://apps.americanbar.org/litigation/committees/trialevide... Strict construction might be the appropriate approach if we lived in a society where language was so formal, standardized, and known that every contracting party would use precisely the same words to describe an agreement.
  - LoSboccacc 10y ago
    That's more tricky, ethereum claims anything permitted by the code is the contract.
- adekok 10y ago
  e.g. Spyglass vs Microsoft https://en.wikipedia.org/wiki/Spyglass,_Inc https://en.wikipedia.org/wiki/Spyglass,_Inc. The deal stipulated that Spyglass would receive a base quarterly fee for the Mosaic license plus a royalty from Microsoft's Internet Explorer revenue.[6] If IE revenue is $0, then royalties are $0, too. Not nice, but perfectly legal. > Without real consequences, what is the incentive to participate if the rules can change when they don’t always go in your favor? That's the root problem here. The law works because people believe that it works. Once people lose that belief, the typical response is violent suppression, or violent revolution.
oolongCat 10y ago
This whole ordeal has made me look at cryto currencies in a less optimistic way I guess, it's all Utopian this Utopian that, freedom freedom this that, until people realise that in the real world things are not as perfect as they imagine.
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j15t 10y ago
Mods, could you please indicate in the title that the validity of this letter has not yet been verified. The attribution in the title: "(The DAO hacker)" assumes that this is an authentic letter.
- gtirloni 10y ago
  I find it ironic that blockchains promote the idea of anonymity while the community spends a considerable amount of time discussing who did this or that. It seems the hunt for Satoshis is an unexpected social consequence of blockchains.
  - StavrosK 10y ago
    But it's trivial to prove that it was the attacker, they can just sign this message with the public key used for the transaction.
lsmarigo 10y ago
How funny would it be if it turns out this was written by someone high up/heavily invested in eTH/DAO to push users to support the fork (which didn't seem anywhere near majority yesterday)
tener 10y ago
He can sue, but who and for what? Essentially the community is showing him a finger even if he didn't break the law. He will keep the money, but they simply won't be doing any business with him.
- raverbashing 10y ago
  He can try to sue (in the US) Next thing the IRS will go after him for the corresponding taxes on millions of dollars of crypto currency
  - Kristine1975 10y ago
    So they pay the taxes. There should still be quite a bit left.
- deckar01 10y ago
  I imagine they sent the cease and desist letters to any prominent personality with stake in DAO that publicly advocated forking. They might try to sue shareholders for inciting other shareholders to breach contract. What makes it weird is that they can't just buy back the shares, because that wasn't in the contract. They have to convince the body controlling the currency, which backs the issued shares, to essentially invalidate and reprint a pallet of virtual cash. Although the DAO shareholders don't necessarily have to participate in the fork for it to succeed, publicly advocating a fork, before the fork, in order to nullify a contract seems like it could be considered a breach of contract.
YeGoblynQueenne 10y ago
So, I know next to nothing about the DAO and Ether, but could some please explain this to me? The way I read this is that someone just proved that all code has bugs and if you use code as a contract, people will inevitably find ways to exploit its bugs and take your money (or, whatever, ether). Is that what just happened?
- em3rgent0rdr 10y ago
  Yeah. And it proves that ether is valuable. And that it is important to debug and beta test in small scale.
  - anc84 10y ago
    How does it prove any value?
    - Kristine1975 10y ago
      If ether had no value there would be no talk of undoing the transaction. That's my guess at least.
      - em3rgent0rdr 10y ago
        Yes. And the fact that people are trying to steal them.
_pdp_ 10y ago
I have no stake in this so perhaps it is easy for me to make comments but here it is: if nobody agrees that there is any value in this currency then there is no value even if real money is involved. I could have written this a little bit better, I know. So a hard fork is in essence the community saying that they do not accept that there is any value for them beyond a certain point. Nobody breaks any laws. The "attacker" can retain what they gained. Nothing changes. The community simply moves on to another island - it is as simple as that. I am not a lawyer but I cannot see how someone can sue you for not wanting to do business with them purely from value perspective. Perhaps this is a bit of an extreme example but it is also as if I start suing everyone because they do not accept doing business with me while I pay them with seashells (once perhaps considered a valid tender).
- bakhy 10y ago
  so, the DAO contract is the only authority, and everything is on the blockchain, except when the collective decides it's not? you say "nothing changes", but something obviously would - "the attacker" would lose their money. and not because any smart contract decided so, but rather >1/2 of the involved participants. of course, he's a thief and should not get the money, but maybe the DAO was flying a bit too high too quickly.
- deleted 10y ago
  [deleted]
programmarchy 10y ago
I tend to agree with the letter. I'd probably feel differently if I was a DAO token holder, but I think forking the blockchain would be a severe compromise of the principles laid out by Ethereum and the DAO: the code is the contract. Just like it was unethical for the banks to get bailed out from bad, risky mortgage-backed securities, it's unethical for the DAO to get bailed out for writing bad, risky code.
- dev1n 10y ago
  The banks needed to be bailed out or else there would've been a massive bank run on the scale of the Great Depression. The people who made those MBS trades should have gone to jail, and they didn't. That's where the injustice stems from.
  - effingwewt 10y ago
    Then that is what needed to happen. Banks failed, therefore they should go away and be replaced with something else. It literally is that simple. By bailing them out we shifted away from capitalism. Which may not be bad, but let's call it what it is. Once we use our own capital to reinforce dead/dying businesses we give them incentive to get too big to fail, make all the cash they can while doing it, and screw everyone along the way. People would have been better off with prepaid cards and cash. We should have used that bailout money to make sure people got their money from banks. This is where the injustice lies. If we didn't send them to prison, we didn't have to PAY them for being criminals. Ugh they even paid themselves huge bonuses with the money we the customers gave them to continue screwing us. Remember them not loaning money though we just GAVE them tons, even though it was a provision of said bailouts? Saying it "wasn't their problem"? Sorry, I'm jaded but when I see people say stuff like that it just makes me so resigned to the fact this is not the place I grew up in, in the 80's.
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wslh 10y ago
The answer, an open letter to the attacker: https://www.reddit.com/r/ethereum/comments/4oo3ud/an_open_letter_to_the_attacker/ https://www.reddit.com/r/ethereum/comments/4oo3ud/an_open_le... And according to this [1] (based on the signatures) the open letter from the attacker is fake. [1] https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_letter_from_the_hacker/d4e7efq https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_le...
verroq 10y ago
This letter is fake. Signatures do not match. Flag and move on. https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_letter_from_the_hacker/d4e7efq https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_le...
- tzs 10y ago
  Even if it is fake it raises interesting issues worthy of discussion, so I'd say note that it is fake, don't flag, and let's discuss those issues.
zaroth 10y ago
I think Levine did a good job debunking the idea that a bit of disclaimer in the Terms of Service would preclude a court of law from considering facts beyond just the [exploitable] code of the smart contract. In the real world courts are fully equipped to handle situations like a faulty contract being exploited by insiders and outsiders alike. Fortunately the law is not a Turing machine. I think if the hacker who exploited this bug ever was uncovered it would not go well for them. But the idea that any miner choosing a fork which blacklists this recursive split exploit is liable for damages to the hacker, that's just laughable. Can you imagine a universe where miners are legally bound to continue investing their hashrate in a particular fork? The entire system is predicated on miners independently choosing whichever fork they want to support. The attacker is welcome to mine as much as they want on their preferred fork, just as any miner is free to do the same. In any case, the market will decide how much the Eth on either fork should be worth. You can argue which fork you would value more, or which universe you would rather live in, but what's neat is ultimately the miners and the market will decide. Whatever direction the Eth ultimately goes, one thing we can be sure of is that blacklisting is always possible to the extent that miners are willing or able to be compelled into implementing them. A campaign against blacklisting this particular address seems to me to be misplaced, because other than enriching the hacker it accomplishes nothing. Miners upgrade their code to express their preferences all the time. Miners can run "official releases" or variations on the same at any time. I think arguing that loading or not loading a particular commit proves anything about the future nature of Etherium is pretty speculative. You can blacklist an address today and not blacklist tomorrow. You can not blacklist today and blacklist tomorrow. My own opinion is that Eth is very much still in Beta (or Alpha) and the community is still in Kindergarden learning how to write secure contracts in Solidity. We should expect these contracts to fail like this more often than not. If the miners vote for a "redo" on this particular bug in this particular contract I think it doesn't matter much either way. The reality is that Eth has a very long road before it can be safely used for its intended purpose, and that realization (whether it should have been obvious or not) will have a larger economic impact than this particular hack being rolled back or not. It's not like this is the only bug in "The DAO" code.
brudgers 10y ago
I am reminded of the engineering triangle, and like most code, the DAO code looks FC optimized. There is a logistical asymmetry. DAO had to allocate resources between engineering the software and selling the idea to investors. There is also an economic asymmetry. DAO can only use a small portion of the total fund to cover the expenses related to code quality. Funds for future projects have to be retained. Returns on investment have to be provided. Conversely, the attacker can potentially cover their expenses with all of the DAO funds. For the DAO, $1,000,000 of defense is a significant portion of operating expenses and has low marginal return. For the attacker, $1,000,000 is an investment in potential 70x return. That's enough to attract sophisticated actors even up into the state level. But even ordinary fintech could pull it off.
mannykannot 10y ago
When Ethereum was first announced, there was a lot of fanciful talk about trustless economies (much of it still easily available). I briefly tried to get a discussion going about the difficulty of verifying Turing-equivalent code, but the zealots thought I was trolling.
atomicion 10y ago
" to the extent you believe there to be any conflict or discrepancy between the descriptions offered here and the functionality of The DAO’s code at 0xbb9bc244d798123fde783fcc1c72d3bb8c189413, The DAO’s code controls and sets forth all terms of The DAO Creation." You can't say on the one hand that the code that lives on the blockchain is the absolute source of truth and then claim when someone uses that code contained in that contract to get rewarded for doing due-diligence that it was wrong. The DAOs hubris is what got the investors into this mess. I was for the forks until I read it. Game Over for the DAO. In fact, the attacker has already won as he could also attack the other fallacy still standing - that decentralization somehow leads to a less corrupt system. Don't believe me? The attacker should simply be less greedy and offer 9 million dollars USD to each of the 4 largest mining pools to NOT observe the fork. He still walks with about 4 million. dwarfpool 9.7% 1882 30.7 1.1 TH/s f2pool 12.8% 904 14.7 557.0 GH/s ethermine 12.4% 701 11.4 431.1 GH/s ethpool 12.5% 511 8.3 313.6 GH/s This would give him the majority and incentivize the miners to not go along with the will of the DAO creators. And consensus still wins. Bought and paid for with money gained from investors who didn't understand or do due diligence before dumping money into a new untested type of organization. Maybe proof of stake will fix this mess. The attacker has already won by showing the hubris and lack of research on the part of investors and DAO creators. The DAO creators can't have it both ways.
atomicion 10y ago
" to the extent you believe there to be any conflict or discrepancy between the descriptions offered here and the functionality of The DAO’s code at 0xbb9bc244d798123fde783fcc1c72d3bb8c189413, The DAO’s code controls and sets forth all terms of The DAO Creation." You can't say on the one hand that the code that lives on the blockchain is the absolute source of truth and then claim when someone uses that code contained in that contract to get rewarded for doing due-diligence that it was wrong. The DAOs hubris is what got the investors into this mess. I was for the forks until I read it. Game Over for the DAO. In fact, the attacker has already won as he could also attack the other fallacy still standing - that decentralization somehow leads to a less corrupt system. Don't believe me? The attacker should simply be less greedy and offer 9 million dollars USD to each of the 4 largest mining pools to NOT observe the fork. He still walks with about 4 million. dwarfpool 9.7% 1882 30.7 1.1 TH/s f2pool 12.8% 904 14.7 557.0 GH/s ethermine 12.4% 701 11.4 431.1 GH/s ethpool 12.5% 511 8.3 313.6 GH/s This would give him the majority and incentivize the miners to not go along with the will of the DAO creators. And consensus still wins. Bought and paid for with money gained from investors who didn't understand or do due diligence before dumping money into a new untested type of organization. Maybe proof of stake will fix this mess. The attacker has already won by showing the hubris and lack of research on the part of investors and DAO creators. The DAO creators can't have it both ways.

257 points by arekkas 10y ago

drinchev 10y ago

Touché What the attacker claims seems reasonable.

carlchenet 10y ago

haha it's unavoidable they're going to sue him. But he seems ready :)

Draiken 10y ago
Ready and with $50M to defend himself? I have no idea how you get actual money out of it, but if he does get it, that's a lot of money for lawyers...
Kristine1975 10y ago
Wouldn't they have to find out his/her real identity first?

sintaxi 10y ago

Well played.

iamben 10y ago

So that's just over 50 million dollars?

nilved 10y ago
50 million Internet dollars. He needs to sell them for real dollars, I believe.
- midnitewarrior 10y ago
  He knew what he was doing, and when it would be done. If you know this, you can short the currency and make a mint without spending the stolen currency.

taspeotis 10y ago

I assume this is fake. To me, it doesn't follow that forking Ethereum to change it's behaviour would constitute "seizure of ... ether". There's no law to stop the Ethereum Foundation from changing their software protocol in arbitrary ways. It's theirs, they can do what they want. There's money involved, but in that case it's similar to the scenario if Supercell decided to remove IAP from Clash of Clans and users couldn't use their gems.

jacquesm 10y ago
It could be a fake, but that has no bearing on whether or not what is written there is factually correct. Judge the document contents on their merits or lack thereof, not by their provenance.
julian_1 10y ago
> There's no law to stop the Ethereum Foundation from changing their software protocol in arbitrary ways. tortious interference with a contract. https://en.wikipedia.org/wiki/Tortious_interference https://en.wikipedia.org/wiki/Tortious_interference

zby 10y ago

It is signed - has anyone checked the signature?

curiousgal 10y ago
It's useless unless you know who signed it; have a public key. Fake. The real "hacker" made millions shorting ETH before the attack.
- robk 10y ago
  I'm curious where one could actually place this volume of short sales on ETH if true.
  - curiousgal 10y ago
    Exchanges deal with a great amount of volume. https://mobile.twitter.com/EthereumWiki/status/743905989682855936 https://mobile.twitter.com/EthereumWiki/status/7439059896828...
- cheez 10y ago
  This is actually brilliant and is almost a no lose situation. * Outcome 1: ETH is forked -> ETH value goes to 0, the shorted currency is pure profit minus interest * Outcome 2: ETH is not forked -> Hacker gets $50 million These are only the technical outcomes but the only social outcome I can see is a lot of suing going on. My suspicion is that it is unlikely that anyone will succeed in a legal challenge, but I'm not a lawyer.
  - curiousgal 10y ago
    Of course legal challenge won't be fruitful. In the eyes of the law using an exploit on an vulnerability found in a contract will still be interpreted as malicious or even criminal and thus illegal,
    - julian_1 10y ago

jackgavigan 10y ago

Setting aside the question of whether the letter is genuine, the attacker is perfectly free to enjoy the ether he stole. However, the rest of us are also perfectly free to adopt a fork if we wish.

jacquesm 10y ago
Yes, but that would be breach of contract.
- mbrock 10y ago
  Can you clarify who would be breaching which contract?
  - jacquesm 10y ago
    The attackers claim (assuming that's who wrote the message) that he merely took advantage of the contract as written is at first reading a plausible one. To change a contract after it has been written and executed and to try to 'undo' a done deal based on actions the contract and its context fairly explicitly ruled out prior to the execution would seem to me to be against both the letter and the spirit of the contract. I get why everybody is upset, but this was pretty much bound to happen. Security of this kind is an all-or-nothing item, you have to get it 100% right or it might just as well not happen at all. So all this backpedaling and fixing does absolutely nothing in my view to strengthen the concept. The only way forward would be to declare this version a total loss and to do a reboot with a better core and then to see how long that one will stand up. Rinse and repeat until one really stands (by then confidence will likely be quite low) and accept that it could still go down at any point in the future. A bit like the Monty Python sketch about the castle built on swampland. Anything less will not do, either the contract is all there is or it is pointless.
    - jackgavigan 10y ago
      Well, the attacker is welcome to try to get a UK court to injunct me against adopting a fork. How far do you think he'll get with that?

matt_morgan 10y ago

One important point here, whether the letter is genuinely from the attacker or not, is the nice summary, in "showing not telling" fashion, of the issue here: if the "The DAO’s code controls and sets forth all terms of The DAO Creation," and the way to undo/mitigate what happened (forking) undermines trust in Ethereum, then we're between a rock and a hard place. I.e., I'd just like to call out the efficient and compelling rhetoric this letter represents.

unixhero 10y ago
Yeah, I thought so too. The truly orthogonal logic and arguments used in the letter are excellent.
crazydoggers 10y ago
The rhetoric of the letter falls flat to me. It misses the point that the "contract" is also code, and contained a legitimate bug. Exploitation of that bug in most places would be a crime. If I figure out that an ATM spits out hundred dollar bills every time I type in a certain pin, that's a crime. I don't get to make the claim that I was rightfully using the ATM. The quote that "The DAO’s code controls and sets forth all terms of The DAO Creation" is a disclaimer that is meant to protect the DAO from those who would seek to imply some sort of guarantee or warranty from the organization. In other words if the attacker makes off with the funds, and the DAO decides to keep the code as is, then as an investor I have no recourse against the DAO. Ultimately the letter misses the main point. The DAO token holders are free to amend the contract code as they see fit thru consensus. The disclaimer never states the contract can't change. And even if it did, the idea that their would be some legal recourse for the attacker, should the community decide to fork, is hilarious. So the letter comes across to me as something an immature troller would write. I'd be suprised if most sophisticated DAO token holders took it seriously.
- achr2 10y ago
  But they so explicitly point to the code as the source of truth for the contract. Banking and trading firms use teams of lawyers to find loopholes in contracts and laws all the time. Why would digital contracts (code) not have the same level of scrutiny / unscrupulous behaviour? Guaranteed if big money is at play in the system non-code based exploits will be used by firms just as often.

sgentle 10y ago

I find this whole situation has an interesting parallel to international law. Unlike other kinds of law that are backed by the power of individual states, international law exists in this weird zone where it's kind of law, but kind of also the United States can do whatever they want because they own all the aircraft carriers and what are you going to do about it punk? That's why it's funny to see Sealand, Hutt River Province, Liberland and other nation-hacking experiments say things like "The Law says this is our nation!". The law is an illusion that exists only in the shade of power, specifically power to provide enforcement. That illusion just doesn't work on the world stage. Any sufficiently powerful actual nation could come and take your island and no other nation would bat an eye. The only reason they don't is because it usually doesn't matter enough to even be worth the bad press. Ultimately, The illusion of law in Ethereum is implemented on top of the power of the miners involved. The miners can and possibly will eradicate The Attacker's carefully grifted money if it suits their interests. Power trumps law. This open letter is being written for two reasons: firstly, the power of the miners can be swayed by appealing to their ideals. Secondly, because this whole virtual legal playpen is still subject to real-world laws and, thus, state power. It's fascinating to see how quickly this smart contract experiment has turned into a struggle between these multiple levels of political power, with really nothing at all to do with the letter of the law as laid out in the contract. Well worth the price of admission, in my opinion.

toyg 10y ago
> this weird zone where it's kind of law, but kind of also the United States can do whatever they want because they own all the aircraft carriers and what are you going to do about it punk? That definition should go on university books, seriously. A lot of what we talk about when we discuss "international law" is a contorted way of making this or that nation prominence as morally justified. > and no other nation would bat an eye ... however, this is a bit too cynical. The UK definitely did "bat an eye" when Hitler seized Gdańsk/Danzig. Russia is currently under sanctions after its Crimea annexation. Just because we don't constantly respond to crisis with full military force, it doesn't mean that we don't care. I personally don't see the equivalence between this situation and international law, because this can really be resolved by a higher power (the State), if necessary by suppressing ethereum altogether. In international relations, there is simply no higher power.

arisAlexis 10y ago

I like this guy

curiousgal 10y ago

A fork doesn't deprive the hacker of anything. In a fork scenario, the hacker keeps 100% of the Ether he obtained, without interference. Every smart contract has been honored in full. It's just that everyone else has decided to start using a new cryptocurrency.

martinko 10y ago
So much for confidence in future smart contracts in ethereum. You have invested in an experimental 'organization' that is defined by the contract that is its code. The code supersedes any other interpretation of the contract. You have agreed to this. Now something didn't go the way you wanted it to, yet fully in line with the code, and you want to fork the entire currency to steal this 'attacker's' property. Good luck with your fork, it will mark the official end of ethereum.
- adekok 10y ago
  > You have invested in an experimental 'organization' that is defined by the contract that is its code. Greed trumps contracts.
appleflaxen 10y ago
I think this is a really fascinating and smart argument. But I think it loses some power when the currency is still called "ethereum", and administered by some of the same individuals who created the DAO. Who knows what a court would think
operative11 10y ago
Aye! Indeed!

0x006A 10y ago

signature fails to validate here: $ helpeth verifySig 0xaf9e302a664122389d17ee0fa4394d0c24c33236143c1f26faed97ebbd017d0e 0x5f91152a2382b4acfdbfe8ad3c6c8cde45f73f6147d39b072c81637fe81006061603908f692dc15a1b6ead217785cf5e07fb496708d129645f3370a28922136a32 Message hash (keccak): 0xaf9e302a664122389d17ee0fa4394d0c24c33236143c1f26faed97ebbd017d0e node_modules/helpeth/node_modules/ethereumjs-util/index.js:403 throw new Error('Invalid signature v value')

Bombthecat 10y ago
Japp, troll.

pjhumble 10y ago

Many legitimate companies take advantage of poorly written contracts for monetary gain. The terms state the DAO's code is the contract. It's just as if he was a lawyer or analyst, who did his due diligence, carefully reading the contract and finding a (legal) loophole. English may be imprecise, and a paper contract could be challenged in a courtroom, but with smart contracts, there is no need for a court, since the contracts are governed by the laws of physics (the VM). When the stakes are real and consequences real, more money and smart people will be attracted to the platform, and over time smart contracts will become more robust. Without real consequences, what is the incentive to participate if the rules can change when they don’t always go in your favor?

heisenbit 10y ago
Yes, wording can be twisted. But the other side can mount the legal argument that this was not the meaning of the original contract. From http://apps.americanbar.org/litigation/committees/trialevidence/articles/spring2014-0614-demise-meeting-of-minds-contract-law.html http://apps.americanbar.org/litigation/committees/trialevide... Strict construction might be the appropriate approach if we lived in a society where language was so formal, standardized, and known that every contracting party would use precisely the same words to describe an agreement.
- LoSboccacc 10y ago
  That's more tricky, ethereum claims anything permitted by the code is the contract.
adekok 10y ago
e.g. Spyglass vs Microsoft https://en.wikipedia.org/wiki/Spyglass,_Inc https://en.wikipedia.org/wiki/Spyglass,_Inc. The deal stipulated that Spyglass would receive a base quarterly fee for the Mosaic license plus a royalty from Microsoft's Internet Explorer revenue.[6] If IE revenue is $0, then royalties are $0, too. Not nice, but perfectly legal. > Without real consequences, what is the incentive to participate if the rules can change when they don’t always go in your favor? That's the root problem here. The law works because people believe that it works. Once people lose that belief, the typical response is violent suppression, or violent revolution.

oolongCat 10y ago

This whole ordeal has made me look at cryto currencies in a less optimistic way I guess, it's all Utopian this Utopian that, freedom freedom this that, until people realise that in the real world things are not as perfect as they imagine.

deleted 10y ago

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j15t 10y ago

Mods, could you please indicate in the title that the validity of this letter has not yet been verified. The attribution in the title: "(The DAO hacker)" assumes that this is an authentic letter.

gtirloni 10y ago
I find it ironic that blockchains promote the idea of anonymity while the community spends a considerable amount of time discussing who did this or that. It seems the hunt for Satoshis is an unexpected social consequence of blockchains.
- StavrosK 10y ago
  But it's trivial to prove that it was the attacker, they can just sign this message with the public key used for the transaction.

lsmarigo 10y ago

How funny would it be if it turns out this was written by someone high up/heavily invested in eTH/DAO to push users to support the fork (which didn't seem anywhere near majority yesterday)

tener 10y ago

He can sue, but who and for what? Essentially the community is showing him a finger even if he didn't break the law. He will keep the money, but they simply won't be doing any business with him.

raverbashing 10y ago
He can try to sue (in the US) Next thing the IRS will go after him for the corresponding taxes on millions of dollars of crypto currency
- Kristine1975 10y ago
  So they pay the taxes. There should still be quite a bit left.
deckar01 10y ago
I imagine they sent the cease and desist letters to any prominent personality with stake in DAO that publicly advocated forking. They might try to sue shareholders for inciting other shareholders to breach contract. What makes it weird is that they can't just buy back the shares, because that wasn't in the contract. They have to convince the body controlling the currency, which backs the issued shares, to essentially invalidate and reprint a pallet of virtual cash. Although the DAO shareholders don't necessarily have to participate in the fork for it to succeed, publicly advocating a fork, before the fork, in order to nullify a contract seems like it could be considered a breach of contract.

YeGoblynQueenne 10y ago

So, I know next to nothing about the DAO and Ether, but could some please explain this to me? The way I read this is that someone just proved that all code has bugs and if you use code as a contract, people will inevitably find ways to exploit its bugs and take your money (or, whatever, ether). Is that what just happened?

em3rgent0rdr 10y ago
Yeah. And it proves that ether is valuable. And that it is important to debug and beta test in small scale.
- anc84 10y ago
  How does it prove any value?
  - Kristine1975 10y ago
    If ether had no value there would be no talk of undoing the transaction. That's my guess at least.
    - em3rgent0rdr 10y ago
      Yes. And the fact that people are trying to steal them.

_pdp_ 10y ago

I have no stake in this so perhaps it is easy for me to make comments but here it is: if nobody agrees that there is any value in this currency then there is no value even if real money is involved. I could have written this a little bit better, I know. So a hard fork is in essence the community saying that they do not accept that there is any value for them beyond a certain point. Nobody breaks any laws. The "attacker" can retain what they gained. Nothing changes. The community simply moves on to another island - it is as simple as that. I am not a lawyer but I cannot see how someone can sue you for not wanting to do business with them purely from value perspective. Perhaps this is a bit of an extreme example but it is also as if I start suing everyone because they do not accept doing business with me while I pay them with seashells (once perhaps considered a valid tender).

bakhy 10y ago
so, the DAO contract is the only authority, and everything is on the blockchain, except when the collective decides it's not? you say "nothing changes", but something obviously would - "the attacker" would lose their money. and not because any smart contract decided so, but rather >1/2 of the involved participants. of course, he's a thief and should not get the money, but maybe the DAO was flying a bit too high too quickly.
deleted 10y ago
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programmarchy 10y ago

I tend to agree with the letter. I'd probably feel differently if I was a DAO token holder, but I think forking the blockchain would be a severe compromise of the principles laid out by Ethereum and the DAO: the code is the contract. Just like it was unethical for the banks to get bailed out from bad, risky mortgage-backed securities, it's unethical for the DAO to get bailed out for writing bad, risky code.

dev1n 10y ago
The banks needed to be bailed out or else there would've been a massive bank run on the scale of the Great Depression. The people who made those MBS trades should have gone to jail, and they didn't. That's where the injustice stems from.
- effingwewt 10y ago
  Then that is what needed to happen. Banks failed, therefore they should go away and be replaced with something else. It literally is that simple. By bailing them out we shifted away from capitalism. Which may not be bad, but let's call it what it is. Once we use our own capital to reinforce dead/dying businesses we give them incentive to get too big to fail, make all the cash they can while doing it, and screw everyone along the way. People would have been better off with prepaid cards and cash. We should have used that bailout money to make sure people got their money from banks. This is where the injustice lies. If we didn't send them to prison, we didn't have to PAY them for being criminals. Ugh they even paid themselves huge bonuses with the money we the customers gave them to continue screwing us. Remember them not loaning money though we just GAVE them tons, even though it was a provision of said bailouts? Saying it "wasn't their problem"? Sorry, I'm jaded but when I see people say stuff like that it just makes me so resigned to the fact this is not the place I grew up in, in the 80's.

deleted 10y ago

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wslh 10y ago

The answer, an open letter to the attacker: https://www.reddit.com/r/ethereum/comments/4oo3ud/an_open_letter_to_the_attacker/ https://www.reddit.com/r/ethereum/comments/4oo3ud/an_open_le... And according to this [1] (based on the signatures) the open letter from the attacker is fake. [1] https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_letter_from_the_hacker/d4e7efq https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_le...

verroq 10y ago

This letter is fake. Signatures do not match. Flag and move on. https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_letter_from_the_hacker/d4e7efq https://www.reddit.com/r/ethereum/comments/4oo1io/an_open_le...

tzs 10y ago
Even if it is fake it raises interesting issues worthy of discussion, so I'd say note that it is fake, don't flag, and let's discuss those issues.

zaroth 10y ago

I think Levine did a good job debunking the idea that a bit of disclaimer in the Terms of Service would preclude a court of law from considering facts beyond just the [exploitable] code of the smart contract. In the real world courts are fully equipped to handle situations like a faulty contract being exploited by insiders and outsiders alike. Fortunately the law is not a Turing machine. I think if the hacker who exploited this bug ever was uncovered it would not go well for them. But the idea that any miner choosing a fork which blacklists this recursive split exploit is liable for damages to the hacker, that's just laughable. Can you imagine a universe where miners are legally bound to continue investing their hashrate in a particular fork? The entire system is predicated on miners independently choosing whichever fork they want to support. The attacker is welcome to mine as much as they want on their preferred fork, just as any miner is free to do the same. In any case, the market will decide how much the Eth on either fork should be worth. You can argue which fork you would value more, or which universe you would rather live in, but what's neat is ultimately the miners and the market will decide. Whatever direction the Eth ultimately goes, one thing we can be sure of is that blacklisting is always possible to the extent that miners are willing or able to be compelled into implementing them. A campaign against blacklisting this particular address seems to me to be misplaced, because other than enriching the hacker it accomplishes nothing. Miners upgrade their code to express their preferences all the time. Miners can run "official releases" or variations on the same at any time. I think arguing that loading or not loading a particular commit proves anything about the future nature of Etherium is pretty speculative. You can blacklist an address today and not blacklist tomorrow. You can not blacklist today and blacklist tomorrow. My own opinion is that Eth is very much still in Beta (or Alpha) and the community is still in Kindergarden learning how to write secure contracts in Solidity. We should expect these contracts to fail like this more often than not. If the miners vote for a "redo" on this particular bug in this particular contract I think it doesn't matter much either way. The reality is that Eth has a very long road before it can be safely used for its intended purpose, and that realization (whether it should have been obvious or not) will have a larger economic impact than this particular hack being rolled back or not. It's not like this is the only bug in "The DAO" code.

brudgers 10y ago

I am reminded of the engineering triangle, and like most code, the DAO code looks FC optimized. There is a logistical asymmetry. DAO had to allocate resources between engineering the software and selling the idea to investors. There is also an economic asymmetry. DAO can only use a small portion of the total fund to cover the expenses related to code quality. Funds for future projects have to be retained. Returns on investment have to be provided. Conversely, the attacker can potentially cover their expenses with all of the DAO funds. For the DAO, $1,000,000 of defense is a significant portion of operating expenses and has low marginal return. For the attacker, $1,000,000 is an investment in potential 70x return. That's enough to attract sophisticated actors even up into the state level. But even ordinary fintech could pull it off.

mannykannot 10y ago

When Ethereum was first announced, there was a lot of fanciful talk about trustless economies (much of it still easily available). I briefly tried to get a discussion going about the difficulty of verifying Turing-equivalent code, but the zealots thought I was trolling.

atomicion 10y ago

" to the extent you believe there to be any conflict or discrepancy between the descriptions offered here and the functionality of The DAO’s code at 0xbb9bc244d798123fde783fcc1c72d3bb8c189413, The DAO’s code controls and sets forth all terms of The DAO Creation." You can't say on the one hand that the code that lives on the blockchain is the absolute source of truth and then claim when someone uses that code contained in that contract to get rewarded for doing due-diligence that it was wrong. The DAOs hubris is what got the investors into this mess. I was for the forks until I read it. Game Over for the DAO. In fact, the attacker has already won as he could also attack the other fallacy still standing - that decentralization somehow leads to a less corrupt system. Don't believe me? The attacker should simply be less greedy and offer 9 million dollars USD to each of the 4 largest mining pools to NOT observe the fork. He still walks with about 4 million. dwarfpool 9.7% 1882 30.7 1.1 TH/s f2pool 12.8% 904 14.7 557.0 GH/s ethermine 12.4% 701 11.4 431.1 GH/s ethpool 12.5% 511 8.3 313.6 GH/s This would give him the majority and incentivize the miners to not go along with the will of the DAO creators. And consensus still wins. Bought and paid for with money gained from investors who didn't understand or do due diligence before dumping money into a new untested type of organization. Maybe proof of stake will fix this mess. The attacker has already won by showing the hubris and lack of research on the part of investors and DAO creators. The DAO creators can't have it both ways.

atomicion 10y ago