A frightening thought huh? This very well may become the case for Ether huffers. Earlier today, The DAO was hacked, and is still under attack as its funds are drained by a malicious entity. This is the result of idiots trusting in a smart contract that could have bugs in it. Just as people do not read paper contracts before signing them, it seems no DAO investor fully read or tested the code composing the organization’s smart contract. Followers of The Most Serene Republic are likely recalling the “mega-thread”TM on the failures of open source software.
The DAO exists as a smart contract on the Ethereum blockchain, however it is vulnerable to recursive split commands. The attacker used this vector of vulnerability to siphon off Ether into a sub-DAO they fully control. After a 27-day window, inherited from the parent contract, the attacker can then begin withdrawing ether. Ironically, this exploit is a direct result of Buterin wanting an blockchain with a Turing complete scripting language.
“Zim hacked the DAO! You have to believe me!”
The pirateat40 Ponzi scheme required a lot of work. Trendon Shavers had to manage all those incoming funds and payouts by himself. Because the consumers have come to expect convenience, a nice fellow has introduced an automated Ponzi scheme via Ehtereum. Instead of paying out old users with new users’ deposits manually, the smart-Ponzi does all the work for you! When people talk about how Ethereum is going to revolutionize the finance industry, this is what they mean: an economy completely based on Pyramid Schemes.
“I have a great opportunity that doubles your money!”
In the scheme above, which is honestly disclosed as a Ponzi, I counted about 400 people once I got to tier 5 and decided to stop counting. Although the contract only works on 1 ETH, I can only imagine a malicious entity repurposing this Smart Ponzi and receiving hundreds of thousands of ETH deposits. The sad reality is it’s only matter of time before an obfuscated DAP (decentralized autonomous Ponzi), starts this process of seeking deposits from gullible bag holders.