When ethereum was born it was truly an innovative project. However as time goes on governance and politics are starting to become more prevalent. Let’s look more in detail at the main issues that ethereum experienced during its history.

The DAO hack: a smart contract that was supposed to work like some sort of investment fund got hacked. For multiple reasons the foundation quickly decided that it was important to go through a contentious hard fork and override the code of the smart contract thus sacrificing the mantra of “code is law” which since that day has never been heard again.

There are many reasons why it was decided to give up immutability of the blockchain. It is rumored that most of the foundation members had invested themselves in the DAO, clearly giving them a strong incentive not to lose their money. Also the fact that a single entity (hacker) could have so much ETH could be a risk if one day the system would migrate to PoS. However this operation was very controversial especially because usually in the blockchain world there is a strong belief that everyone should take responsibility for their actions. What if tomorrow another DAO is created, it raises a lot of ETH, contains a bug and so could endanger the transition to PoS once more? Will another hard fork be performed? Another option could have been to simply freeze the money in the DAO contract forever so that the eventual transition to PoS would not have been endangered but also punishing the people that decided to invest in a highly speculative and untested contract without proper research to ensure that those people cannot repeat the same mistake with another potential DAO and put once more the network at risk.

On the other hand more recently there have been other issues with ethereum, mostly related to the multisig wallet from Parity. Parity is not just some company producing applications for ethereum, it is the creator and maintainer of the Parity node which basically runs around 50% of the network. The official multisig contract of one of the official ethereum full nodes had a major bug which resulted in the money being frozen.

Let’s look at this more in detail. You have a user using the official implementation of ethereum, that user wants to keep his money as safe as possible so he decides to use the multisig option which is recommended in order to keep the ETH as safe as possible. Turn out that the official implementation has a bug which basically freezes the money in the contract.

The current solution from ethereum seems to be to just do nothing. Just let that money remain frozen.

It seems very weird to me that basically when the foundation members plus a bunch of speculators invested into a highly risky and speculative contract the foundation felt the need to return their money in full. On the other hand when people wanted to keep their money as secure as possible following the guidelines of the official client implementation and it turns out that there is a bug in the official software the decision is to do nothing and keep the money frozen.

Besides the obvious ethical issue (rewarding the risk takers who lost and punishing the risk adverse that followed the official instructions) this also spells very bad for future corporate adoption of ethereum.

Ethereum currently has the advantage of being by far the main platform for smart contracts, but new competitors are coming and their refusal to evolve could be a big advantage to their competitors.

Zilliqa

Zilliqa is a new ethereum competitor that will ensure this kind of problem will not happen anymore.

It is not clear exactly what interest the ethereum foundation is trying to protect with its strong commitment to non-action. It could be that since most of the money raised by a project called Polkadot which some people perceive as a potential competitor to ethereum was also into one of those multisig contracts which have been affected the choice may be that it’s worth sacrificing all those users that lost money because of the bug in order to be sure that one competitor is damaged.

It will be interesting to see which strategy will win in the future. Strategies of innovation like for example Zilliqa or more politically based strategies where a bigger project tries to destroy/sabotage other projects that could be perceived as threats.

It seems that after all blockchain governance may converge with corporate governance of traditional large corporations, at least in the case of ethereum.