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The craziest crypto scams and hacks: Part 5: How Ethereum almost died because of a hack - Crypto in Plain English - Episode 129 - by cryptohunt.it
The craziest crypto scams and hacks: Part 5: How Ethereum almost died because of a hack
Welcome to the cryptohunt jam where we spend one minute a day on crypto and its history. In plain english.
Today's episode is about another kind of hack, one that targeted weaknesses in blockchain technology to steal a lot of Ethereum.
It started with an ambitious idea in 2016. A group of coders from Germany came up with the idea of the DAO, a decentralized organization that would act like a venture capital firm, but without employees. Instead, anyone who sent Ethereum to the DAO would in turn get partial ownership of it, and voting rights to determine which investments were to be made.
And it exploded. Over just a month, the DAO raised $150 million dollars from over 11,000 investors. The creators were proud, especially because most money came from a bunch of smaller investors, truly democratizing venture capital.
The DAO’s operation was controlled by computer code, meaning the rules are set in stone and in theory nobody could mess with that. Unfortunately, the code had bugs though, and hackers were able to siphon off $40m of the funds.
The entire young Ethereum community was fighting over what to do. In the end, two sides existed: One which wanted to just move on, and the other, which wanted to roll back the history of the blockchain, restart from before the incident, and operate in that alternative reality.
The fight was so strong that Ethereum almost fell apart. In the end, two Ethereums came out of it: The one we know today altered the blockchain’s history. The other, called Ethereum Classic, kept history as it was and moved on.
And there you have it – many hacks can come from within. Blockchains are just computer programs, and they can have problems too.
Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.
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By cryptohunt
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The craziest crypto scams and hacks: Part 5: How Ethereum almost died because of a hack
Welcome to the cryptohunt jam where we spend one minute a day on crypto and its history. In plain english.
Today's episode is about another kind of hack, one that targeted weaknesses in blockchain technology to steal a lot of Ethereum.
It started with an ambitious idea in 2016. A group of coders from Germany came up with the idea of the DAO, a decentralized organization that would act like a venture capital firm, but without employees. Instead, anyone who sent Ethereum to the DAO would in turn get partial ownership of it, and voting rights to determine which investments were to be made.
And it exploded. Over just a month, the DAO raised $150 million dollars from over 11,000 investors. The creators were proud, especially because most money came from a bunch of smaller investors, truly democratizing venture capital.
The DAO’s operation was controlled by computer code, meaning the rules are set in stone and in theory nobody could mess with that. Unfortunately, the code had bugs though, and hackers were able to siphon off $40m of the funds.
The entire young Ethereum community was fighting over what to do. In the end, two sides existed: One which wanted to just move on, and the other, which wanted to roll back the history of the blockchain, restart from before the incident, and operate in that alternative reality.
The fight was so strong that Ethereum almost fell apart. In the end, two Ethereums came out of it: The one we know today altered the blockchain’s history. The other, called Ethereum Classic, kept history as it was and moved on.
And there you have it – many hacks can come from within. Blockchains are just computer programs, and they can have problems too.
Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.