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Why I think Ethereum is in a big trouble? by innuendo

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· @innuendo · (edited)
$96.37
Why I think Ethereum is in a big trouble?
https://i.imgsafe.org/d470f56061.jpg
Let's assume the hard-fork is performed and the DAO attacker is deprived of the 3.6M ether he has drained. What happens next?

### The alternative
If he is a smart ass (and he seems to be) the attacker will take the case to the court and press charges against **anybody** involved in the hard-fork. And now we'll have this alternative:

- The defendant maintains the stance that no entity stands behind the DAO. This implies that the DAO is fully autonomous and its code is the only source (or manifestation) of the contract. This wins the case for the plaintiff.

- The defendant maintains that the attacker's actions were "illegitimate" and the DAO contract in extreme cases can be superseded by external actions (such as hard-fork).  But then we have two big problems:
(a) The white hat operation becomes equally "illegitimate".
(b) Slockit (or anybody involved) can be easily accused of an illegal attempt to raise funds.

This is a deadly alternative. To preserve the legality of the DAO, people involved in it must stick to the interpretation that there is nothing more but the DAO. Yet to be able to defend themselves against the attacker's charges in a court of law they will have to expand this interpretation and admit that the DAO is not fully autonomous. This situation requires walking a very thin line.

### Additional facts
These two facts can have crucial impact in this case:

- The DAO's terms and conditions clearly state that there is no other binding documentation but the DAO code. Also, they do not specify jurisdiction in case of a dispute. This implies that the attacker can perform so called *jurisdiction shopping* or, in other words, he can choose any jurisdiction that suits him in terms of law favorable to him.

- Here is a fragment of the open letter allegedly written by the attacker:
*I have carefully examined the code of The DAO and decided to participate after finding the feature where splitting is rewarded with additional ether.*
This basically means that the attacker will insist that due to the lack any other binding documents, what he did was right in terms of his understanding of the contract. By acquiring a good layer and following this strategy, he is quite likely to either win the case or cause lots of legal difficulties for anybody involved  in creating and deploying the DAO. Also, this will scare anybody in the future to do an enterprise similar to the DAO on the Ethereum platform.

### Persistence to be expected
So it all depends how persistent the attacker is going to be. My prediction is that even after the hard-fork the attacker will not give up easily due to these two facts:

- There is a lot of money involved so even if there is a 10% chance of wining, the expected value is still big.

- He can easily recoup his legal fees by insider trading (e.g. he can short ETH again just before he files the charges).

### Identity revealed
There is just one important caveat: in order to take the case to the court, the attacker will have to reveal his identity. Will he be willing to do that? But even if he is not, he can always sell his private keys to somebody who has no problem with that. Surely there will be many people willing to take on this role. There is simply too much money involved to assume the DAO incident will be closed after the hard-fork.

***Disclaimer**: I am not a lawyer so I might be wrong.*

EDIT: For more professional insight please refer to [this conversation](https://letstalkbitcoin.com/blog/post/andreas-antonopoulos-is-live-right-now-with-part-2-of-ltb-297-the-death-of-thedao) at 0:46:30-0:48:00 and 0:58:30-1:09:00.
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@chitty ·
I don't think the hacker will reveal his identity, I believe he shorted ETH right before the hack and made some good money. However I agree with you that he has a good case if this was to be taken to court.
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@dana-edwards ·
Which court? Also being hated by 20,000 people seems to be not very smart.
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@innuendo ·
But he can still make a lot more. I think the crucial thing is that he can choose any jurisdiction he wants.
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@sean-king · (edited)
$6.70
I'm a lawyer and here are several thoughts:  

1). The attacker won't sue.  By revealing his identity he faces potential criminal liability--not saying he'd be convicted, but he'd likely be charged, which is hugely problematic.  

2). It's true that there is no "entity" behind the DAO.  This does not however mean that "code is law".  The code is written to operate on a platform (Etherum) that operates in a manner known to all parties in advance.  By its very nature, hard forks (or 51% attacks if you prefer to call them that) are possible, often even advisable, on Etheruem.  In other words the "terms" of the DAO contract are explicitly subject to the terms of Ethereum itself.  And, nobody has violated Ethereum's terms.  So...nobody has potential legal liability for a fork.  

3). The fact that the terms of Ethereum supersede the terms of the DAO, and that hard forks are therefore both possible and legal, is irrelevant to whether the hacker's actions were legit or not.  In other words, Ethereum is entitled to fork regardless of the legitimacy or the motives of the attacker.  Even if the hacker's actions were perfectly legit, so were the miner's actions also perfectly legit by forking.    

4). Who is the attacker going to sue anyway?  Miners?  No Etherum miner can cause a fork on his/her own.  Miners representing more than 51% of the hashing power must do so.  Those miners are scattered all across the world in multiple legal jurisdictions.  The attacker very likely can't gain jurisdiction over a sufficient number of them to hold anyone accountable even if courts were likely to be sympathetic to his cause, and they won't be.  You can't sue a Chinese miner in US courts, and vice versa.  Plus, just identifying the miners to sue would be hard.  

Developers?  All they did was write code, which in the US at least is considered speech.  Courts in the US can't compel miners to speak in certain ways (that is, write the code the way the court wants it) or to silence speech (that is, not to write code at all).
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@bitcube ·
$1.46
Great to have the view of a lawyer based on the law/facts rather than some wishful thinking.
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@eeks ·
$0.21
Great post, thanks for writing it.  We don't have enough lawyers involved with Ethereum.  "We don't have enough lawyers" not being something people say aloud often.  :)
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@innuendo · (edited)
The attacker also used the blockchain according to its rules. He did not hack anybody's private keys. If we limit ourselves to the blockchain's perspective only, we can defend the hard-fork and white hats but by the same token we can also defend the attacker's actions. 

The most obvious choice for suing is Slockit. But he can also sue any of the miners he can identify and accuse them for the hard-fork. It does not matter that a single miner does not have enough hash power, it's enough the miner was complicit in "an act of depriving the attacker of his property".

You say hard-fork is part of the Ethereum protocol. That's the case from the blockchain perspective. But if we treat Ethereum or the DAO as some sort of business partnership, I guess you cannot exclude a business partner (or shareholder) on a whim.

Anyway, I agree that the case is complex and not easy to win for the attacker. But my point is that the stake is high and with a good lawyer he's got a strong case.
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@innuendo ·
$0.18
For another lawyer's view (Pamela Morgan and Brian Klein) please refer to [this conversation](https://letstalkbitcoin.com/blog/post/andreas-antonopoulos-is-live-right-now-with-part-2-of-ltb-297-the-death-of-thedao) at 0:46:30-0:48:00 and 0:58:30-1:09:00.
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@xeroc ·
$6.02
Very well written! I share the same thoughts but couldn't have expressed them that clearly! Good job!
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