[Crypto News] Dan Larimer of Steemit hacked for $12mil, spurring th...

Dan has been a controversial character in crypto

One of the OGs of blockchain really, having been involved since 2009. There must be a reason why he seems to be leaving Steemit to its own devices. As co-founder he has become an absent parent, while the child grows up on its own steem. One thing you have to remember about Dan that will always be to his great credit, and that is his creation of DPOS (Delegated proof of stake algo) or Consensus algo. We can chat about that in another post, as well as the grapheme technology he introduced.

alt
source

The Consensus model

Dan is busy with his new creation now namely EOS, or more particularly the company behind them – Block.one. One thing you have to say for the two cryptos he produced is that they both seem somewhat centralised around a small group of about 21 witnesses or top voters for consensus on their respective blockchain. A solution with flaws of its own perhaps. Dan’s earlier brainchild Bitshares is also a wonderkind based on the DAO (decentralised autonomous organization) protocol of shareholders who vote for consensus.

Bugs abound

That being said, no crypto is really safe to be honest. Even bitcoin has numerous bugs in its code that are being discovered occasionally. Hackers are exploiting vulnerabilities in the code and making off with millions in various chains and exchanges. Not as much as some of the huge hacks of crypto history, but a few million here and a few million there all add up. Even Dan just got hacked recently. Actually one of the 21 block producers of his golden child EOS got hacked, namely Bancor, an Israeli digital asset exchange and they lost $12.5 million.

The freezing of transactions

It could have been $10 million worse if it wasn’t for the unique protocol of the Bancor token BNT, which allows it to be frozen mid-stream, while the transaction is in place. They were able to save themselves a further big loss with that nifty little aspect. It still causes a lot of controversy though among crypto-enthusiasts. In June last year around the time of the live EOS blockchain launch, the 21 block producers went rouge and unanimously voted to freeze seven accounts. Of course those accounts were suspected of a hack or sorts so it was probably for the better. Nevertheless it still defied the EOS constitution. It was a tricky loophole perhaps which seems to have worked, but it does show the fragility of the DAO system.

The corporation of 21 voting shareholders - you could call them that – are supposed to be merely the executers of the decisions made by an arbitration body. Apparently the arbitration body had already refused to freeze the accounts. But the 21 still went ahead and pulled the move. Sounds like mutiny to me, or maybe a presidential executive order. It depends which way you look at it.

It seems to be a symptom of the system that Dan has evolved here.

Let’s see where it goes.

Even Nick Szabo, another OG of note

Has tweeted negatively about the weaknesses of the EOS constitution. I guess us cypherpunks struggle with centralization. There is a concept called “immutability”, that a bunch of voters shouldn’t be able to break. Even grand OG himself, Charlie Shrem said

“[Immutability] is real censorship resistance and the reason I got into [cryptocurrencies] in the first place. If [a single few] can freeze, reverse, control anyone’s accounts, what’s the point of a cryptocurrency?”

What this shows us is that the jury is divided. It’s not easy to come to a consensus about consensus protocol in crypto. There are pros and cons to each system it appears. After all, the rebel freeze of the EOS and Bancor accounts, when needed, did save millions in potential losses through hackers. I’m just saying…

Fighting back after the hack

Nevertheless, as retaliation to this hack, Dan and Block.one have become the leading hirers of white hat hackers via their bounty programs designed to find any bugs in the system. Bounty hunters earned around half a million dollars in total from Block.one this past year. One white hat made $120 000 in just one week solving problems and finding bugs in the protocol for EOS and Bancor, who are practically interdependent coins now.

alt
source

Coinbase has also been awarding bounties to bug detectors

To the tune of just under $300 000 in total. And then let’s not forget that TRON also contributed in hiring white hats, awarding a token $76 000. So there is work out there for you geeks and coders. We are only seeing the tip of the iceberg I think, as far as repairmen for bugs are concerned. A lot of code is patch jobs or cut and paste and it will have flaws along the way. So get your white hat on and seek your fortune in the blockchain era as it unfolds before us. Dan might require your services at some new project of his.

Otherwise think up a new protocol to improve the witnesses, voters or shareholders on one hand and the expensive miners on the other.

Proof of post perhaps.

Enjoyed reading today's report of the Crypto News?

Follow up for future reports on the latest crypto news, share your thoughts in the comment section and in case you missed out, below are some of the past CN articles.