After the DAO fork, many of the 'bankrupt' early investors got their investments back. Returning these funds to the early visionaries allowed them to continue to promote and invest within the platform, on the ETH chain. This educated investment force localized on the ETH chain resulted in the value superiority over the alternate ETC chain.
Looking back at my previous and mostly supportive post about Ethereum and Ethereum Classic: Why Consensus: The tale of two Ethereums. I will outline some further criticisms of the ETC project as well as detail one hypothesis for the development success of the ETH chain.
First post in the series: Hardfork: the tale of the full node referendum
The early investors in ETH, those who got in around the crowd sale, were the visionaries. They understood the possibilities of an idea not yet tried or implemented and gave the biggest show of support they could: money. Thousands of these angle investors allocated large portions of their ETH holdings to the single DAO contract. This was up to 12% of all Ether in circulation at the time. The entire goal of this single contract was to fund startups and innovation in the Ethereum ecosystem. This mutual relationship was promising the ability to grow the Ethereum project into the diversified application playground envisioned by Vitalik and his supporters.
The theft, and subsequent destruction to the DAO removed this huge amount of funding from what was the driving force in Ethereum innovations. On the ETC chain, the hackers held these funds. The ETH chain retained the investors control over their investment Ether. Not having these funds under the control of a single group of hackers but investors who were willing to contribute billions of dollars to ICOs and other projects on Ethereum is likely one of the driving reasons for the success of ETH over ETC.
Looking back,
In my previous ETC post: Why Consensus: the tale of two Ethereums - an opinion on Ethereum and Ethereum Classic I outlined some of the reasons why I supported the existence of Ethereum Classic and how I enjoyed the freedoms granted by the hard forking process. I want to revisit some of this post and add some comments regarding some of the other forces acting at the time. There was much more at play than just the community's feelings of blockchain integrity.
After a controversial hard fork, two versions of the Ethereum blockchain remain; development and market valuation have shown Ethereum (ETH) as the community choice. Here I will outline why hard forks preserve decentralization and how a vision of immutability may be less important than one of consensus. Let this post be a continuation of Hardfork: the tale of the full node refrendum
Why are there two Ethereums? The story of the hard fork
On June 17, 2016, a hacker was able to exploit a contract deployed to the Ethereum blockchain, moving $60 million in tokens to an account controlled by the hacker. The community scrambled to remedy the situation - given 30 days until the code would allow the hacker to withdraw funds. As other solutions and proposals failed, the consensus in the community settled around using a hard fork to rescue the stolen funds. This involved directly changing the protocol, requiring all users to update their clients to remain on the chain. At the time of the fork, the nodes in disagreement with the changes to consensus continued the unchanged blockchain. The Ethereum Foundation and most developers/users updated their clients. This resulted in the unmodified (ETC) and modified (ETH) chains splitting - with Ether on each chain independently tradeable.
That 60 million in tokens was representative of around 12% of all Ether in circulation
The Ethereum Foundation issued the following statement on their blog regarding the fork:
The Foundation has committed to support the community consensus on the admittedly difficult hard fork decision. Seeing the results of various metrics, including carbonvote, dapp and ecosystem infrastructure adoption, this means that we will focus our resources and attention on the chain which is now called ETH (ie. the fork chain). That said, we recognize that the Ethereum code can be used to instantiate other blockchains with the same consensus rules, including testnets, consortium and private chains, clones and spinoffs, and have never been opposed to such instantiations.
[...]
Users are generally advised that most Ethereum client defaults, including clients developed by the Foundation and by third parties (eg. Parity), will select the ETH chain
-Ethereum Blog
After the fork, The Foundation committed to developing the ETH chain after following community support. In the months following this split, development on Ethereum has exploded with a majority following The Foundation's footsteps. It is important to note how The Ethereum Foundation addresses Ethereum Classic's right to utilize the Ethereum code how they see fit. It is this user agnostic property that makes decentralized applications so valuable.
This should not serve as a comprehensive history of what happened during the time between the hack and the hard fork nor the actions taken by Ethereum Classic shortly after the fork for that matter. See the Ethereum Blog and read some of the Classic user's arguments.
I believe some reading into Barry Silbert and his relationship with ETC is also important in forming your own opinion here. What interests did the established Bitcoin community have regarding hard forks and chain splits? A quick google search on Barry and ETC pumping should give you plenty of material. Please come back and post in the comments if you have questions or ideas.
Criticism of a hard fork - is code law?
Many users were critical of the hard fork, hence the Ethereum Classic chain; users felt betrayed from an unwritten social contract that "code is law" where whatever is in the blockchain is taken as the final truth. The hard fork edited the transaction history of what some assumed was an immutable blockchain.
Critics of the fork emphasize the perceived necessity of immutability - where the truth whatever the code outputs, even if that "truth" has no bearing on what the humans wanted.
The Ethereum Classic project describes itself:
Ethereum Classic is a continuation of the original Ethereum blockchain - the classic version preserving untampered history; free from external interference and subjective tampering of transactions.
The takeaway from this is that code is not law but rather exists as a tool for humans to assess and ultimately reach consensus. As users of blockchain technology, we must understand the deep social contracts that go far beyond the code forming consensus. Humans might not always want to accept code as law, especially if doing so provides them no value (i.e. malfunctioning contract). Humans find much deeper Schelling points when reasoning, code can never be guaranteed to align with human's intentions at all times. Especially when those intentions encompass the complexities of value and money.
I left out an important point regarding the code is law arguments made by Ethereum Classic supporters. Ethereum Classic broke their stance on immutability at the very beginning. They certainly don't market any of these changes. They have changed their transaction execution rules to mitigate DoS attacks. This change altered the execution of several Ether containing contracts. Barry Silbert rallied the community around the need to finalize a "monetary policy" - so his investment fund could be considered. They also had the difficulty bomb to deal with. ETC is not the "code is law" they claim. - no blockchain can be.
Full node referendum - why hardforks
With respect to decentralized applications - hard forks are what allow users to align code to the deep nuances of human's changing consensus. With hard forks, it is ultimately up to you to choose to participate. If the social referendum is controversial, users are able to follow their principals by choice: as per Ethereum Classic. It is important that we avoid soft forks or other protocol changes that could endanger the explicit choice of a hard fork.
Vitalik, founder of Ethereum writes:
I personally like hardforks. Particularly, I like the fact that they give users a measure of control, requiring them to opt into protocol changes. Sure, they can be a little more chaotic if they're controversial, but that's the price of freedom.
-Vitalik Butein
Even with the benefits hard forks have, Vitalik makes it clear that they are not a stop-gap for other technology. It is clear from history that hard forks are not an agile way to protect a blockchain. New solutions will be needed in the future.
FYI I personally am not in favor of accepting a long-term commitment to activist forking norms. I also think that hard forks will become technologically riskier and riskier over time and at some point assuming sufficient institutional adoption they just won't be available as an option anymore; our job is to make sure that by that time contract safety features are easily implementable and usable as a layer on top of the protocol.
-Vitalik Buterin
Hard forks are still the best way to preserve user choice. Even with all of the issues that may cause you to make an ill-informed choice, it is your ability to make one that stands paramount.
I previously closed with the following quote from my first entry in the consensus series:
The moral of this story is the hard fork gave users choice. Although the fork resulted in a smaller community of "Ethereum Classic" with a tenth of the market cap, this community was not censored with a soft fork (despite the attempt). Their ability to hard fork represents the ability of choice in a decentralized network. The majority of the community did choose to freeze the funds, in my assessment, this is what the essence of social consensus is meant to be in a decentralized world. Code might be law, but we humans still have the ability to form consensus too.
While this is certainly true about the user choices involved, it neglects some of the forces acting to keep the chain alive. Choices that go against some of the community rally points like immutability. With the outside interests like Barry Silbert and other Bitcoiners at play - users might have had a choice but every bit of information surrounding that choice may have been manipulated.
it will be important to employ strategies in the future that allow you to remain agile in situations with heavy manipulation. This is the big leagues and most of us are going to be the smallest of the small fish. Exercise caution. 'Code is law' is a mantra designed to obstruct and contain the messy ways humans form consensus. It was supposed to protect the small fish; everyone with the same code. Code will never be law in the strictest sense, messy and human consensus is strong.
Who stood to gain from ETC success
The Bitcoiners
The Bitcoin community was not supportive of the hard fork returning funds to investors. While in my opinion most of the community was strictly supporting the code is law mantra that runs deep in Bitcoin culture, there were certainly members of the community with different motives.
Bitcoiners (Silberts included) were historically not supportive of Ethereum as a project in the first place. Forums and Reddit were littered with "Why Ethereum can never work" posts. As Ethereum grew in popularity, development and most importantly price, many from the Bitcoin realm wanted to disrupt the Ethereum network anyway they could. They essentially wanted to prove that hard forks were dangerous; the best way to do that was to make Ethereum's attempt as messy and contentious as possible.
/r/Bitcoin, a heavy-handedly moderated subreddit, began to allow posts supportive of the unaltered chain and promoting mining and nodes for the alternative chain. This practice in stark contrast to the subreddit's usual zero tolerance for 'altcoin' discussion.
Silberts
The Barry Silbert-owned exchange Poloniex became the first exchange to allow trade of the old chain coin under the ticker ETC. The listing of an asset on an exchange, especially one as prominent as Poloniex, can be cause for artificial legitimization. So many coins, clearly scams, pump hard when first listed on exchanges; humans like having things to trade and speculate.
This Ethereum bashing family rapidly became Ethereum Classic evangelicals.
Silbert rallied the ETC community around designing a monetary policy that would be attractive to investors. Silbert and his institutional connections brought the deceptively named Ethereum Investment Fund to market.
Here is some required reading about Barry Silbert's Bitcoin shenanigans and ETC pumps. Barry Silbert and the Cost of Bitcoin’s Malfeasance Culture
I hope this was informative,
Kyle
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