48h ago DAO suffered an attack, about 32% of ether under DAO’s control were moved to a child DAO and will sit there for at least 27 days.

To execute attack there was a gas cost, so attack stopped as a solution of soft and hard forks emerged. Looks like attacker’s primary objective was to trigger panic selling of ether and DAO tokens and profit from short selling them. Several large short positions were opened on exchanges just before the attack started.

Following the attack ether lost about 40% of its market value. While DAO tokens are traded at about 2/3 of their original ratio to ether.

Proposed solutions:

Soft fork: disable withdrawal of ether from all DAO contracts, main and child alike, that would effectively freeze funds under DAO control indefinitely. Soft fork implementations are already available and will have to be deployed by miners. Soft fork basically freezes the situation with DAO until hard fork is agreed upon.

Hard fork: proposed hard fork would replace existing DAO contracts with a single contract that would only allow for holders of DAO tokens to convert them back to ether at an original ratio of 100 DAO tokens to 1 ether.

Both soft and hard forks are very likely to happen as it is beneficial for all parties involved in making these decisions. Everyone would lose if they weren’t implemented, as that would probably mean a serious if not mortal blow to ethereum. Check out fascinating transcript of chat between Ethereum Core people and exchanges, link. Top ethereum developers and Vitalik himself think that attacker can’t be allowed to obtain 5% of all ether.

What is good and lucky in this situation is that no ether in control of DAO was spent on any project before this attack and no rollback of transactions is necessary to fix the situation.

But you might say there is so much opposition to forks, especially if you look at the DAO slack, ethereum reddit or god forbid Polo trollbox. Most of it comes from vocal minority which would benefit from ether falling, e.g. have short positions on ether or are heavily invested in other coins like bitcoin or lisk.

Some who oppose forking just misunderstand what that would do. Ability to implement forks in ether is not a weakness its a major strength. Ethereum was hard forked already when Homestead version was released and will be hard forked in the future when it will switch to a POS algorithm. Compare that to Bitcoin which can’t find a way to at least make a simple change of increasing its block size. Systems/organisms which can’t adapt/evolve die, thats a fact of life. So understand that forks is a way for ether to evolve and respond to threats like the one happening now. Forks happen only if majority of ethereum community support them and they are necessary for long term ethereum viability.

PS: to all bitcoin holders, its very likely that in 5–10 years bitcoin/ethereum relationship will be analogous to that of myspace/facebook of today. One had an advantage of being first to the market until significantly better solution took over…

Disclosure: I’m a long time ethereum supporter, have been buying ether every opportunity I’ve had including past 48h. I’m a long term investor as I believe in the vision of ethereum and haven’t sold a single ether to this date.