Charles Hoskinson, who founded Ethereum before leaving in June 2014, discussed smart contracts and Ethereum's hard fork debate during a Coinscrum Members Club appearance. Hoskinson now runs Input Outp
Charles Hoskinson, who founded Ethereum before leaving in June 2014, discussed smart contracts and Ethereum's hard fork debate during a Coinscrum Members Club appearance. Hoskinson now runs Input Output, a Hong Kong company developing cryptocurrencies and blockchains.
Smart contracts offered genuine opportunities. Hoskinson saw positive uses. He even imagined a DAO for Bitcoin development, allowing the community to fund protocol upgrades. But the technology hid serious dangers. "These ideas are encapsulated with thousands of booby traps, cobras, and other terrible things," Hoskinson said. "Why? Because they involve people. Algorithms are dumb, and people are smart. If a human designs an algorithm, then there's going to be a human that's good at designing a way out of that algorithm to steal funds. That's exactly what happened with The DAO."
Security experts expected more disasters. Rootstock, an Ethereum-style sidechain of Bitcoin, championed "progressive decentralization" as protection.
The DAO itself bore out these warnings. Its creators aimed to "maximize decentralization without any safeguards and accepting any personal liability." They collected over $150 million in ether, betting that "random people on the Internet would be better at investing that money than professionals."
But the code was faulty. "The problem is that code didn't behave the way they intended," Hoskinson said. The creators wrote it in Solidity, which "really doesn't give you any formal guarantees," and released it with no spending limit. Few had examined the code before $150 million entered it. Once that amount started flowing in, researchers scrutinized it and found the flaw. That sum essentially became a bug bounty on the smart contract. Bitcoin had shown the same pattern: as its market cap grew, more people hunted for weaknesses.
Hoskinson used a Ferrari analogy to explain what came next. "When you turn the driver's keys over from a Ferrari to a machine, you have to sometimes accept that the Ferrari is going to kill people. And you have to accept those consequences."
Yet the Ethereum community chose to intervene. The plan: hard fork the blockchain and reverse the losses. Hoskinson opposed this. "When you start intervening, it kind of diminishes the entire purpose of these types of systems in general," he said. The move set a terrible precedent. Where would it stop?
He cited Gatecoin. When hackers drained that exchange, did the Ethereum community hard fork to reverse the theft? What about wallet losses? "Should we intervene to go ahead and reimburse those people?" Hoskinson asked.
He suspected favoritism. "Why do they get screwed and people who put money in The DAO [don't]? Is it because the [Ethereum] Foundation has a very close relationship to The DAO? Okay. Maybe; maybe not."
The hard fork meant refusing to accept the DAO's consequences. For Hoskinson, that risked everything. "It creates a moral hazard of when and how do you intervene?" he said.
The Bitcoin community viewed Ethereum's move as a betrayal of blockchain principles. Hoskinson saw something different: an opening for better designs. Third-generation blockchains like Tezos could encode governance mechanisms from the start. Developers could retrofit these approaches to Bitcoin, Ethereum, and other networks. That's where real solutions emerge, not in reversing past failures.
