Matthew Spoke is the founder of blockchain startup Nuco and a former consultant at Deloitte Canada.

In this opinion piece, Spoke (with the help of his CTO Jin Tu) discusses the developing ramifications of the ethereum community’s decision to change its consensus code, arguing its unintended consequences illustrate the shortcomings of public blockchain networks.

Try explaining what a blockchain is to a layman. Not a simple task.

Now consider how difficult it can be to explain ethereum, The DAO, the DAO attack and now the ETH/ETC divide that is surfacing within the community.

To explain the concept of a blockchain, I often focus heavily on the concept of immutability – the idea that any piece of history recorded on a well-distributed blockchain is in essence irreversible, or permanently engraved in time. But if that’s true, how can one explain the ethereum hard fork debate?

I tend to agree with a recent CoinDesk piece that argued the hard fork should be seen as a “rite of passage” for a technology still very much in the process of maturing (although while heavily under public scrutiny). But, that said, whether deserved or not, it seems like the public holds ethereum to a higher standard. (In part, this may be because of the increasing number of companies around the world leveraging the technology in labs, and buying into the rhetoric that ethereum might be the biggest game-changer since the Internet).

With that in mind, I think it’s worth highlighting some of the important risks and lessons facing the ethereum community, the companies leveraging it and those invested in its success.

Essentially, last week’s hard fork has had an unexpected consequence: the creation of two parallel ethereum chains; ETH (the version of ethereum that accepted the hard fork) and ETC (the version of ethereum that has rejected it – “Ethereum Classic”).

Because of philosophical disagreements in the community, a certain number of miners have opted to continue supporting the unforked chain (ETC). This is contrary to the basic concept in blockchains that the longest chain is the authoritative history.

In this case, ETC, with less hashrate, has created an alternate truth.

This is where the new “double spend” problems occurs. If you held ether before the hard fork, (block 1,920,000), you now have tokens represented on both chains (ETH and ETC), each of which now has its own trading value, but the same genesis block.

As of the writing of this opinion piece, ETC is trading at approximately 5% of the value of ETH.

Now, why is this a problem?

Our CTO, Jin Tu, uses the following scenarios to illustrate why this might be cause for concern:

Sell ETC and keep their ETH – Without touching their ETH balance, owners can cash out in ETC on exchanges like Poloniex that are accepting the alternative fork’s currency. This is essentially an opportunity for a simple 5% gain.

– Without touching their ETH balance, owners can cash out in ETC on exchanges like Poloniex that are accepting the alternative fork’s currency. This is essentially an opportunity for a simple 5% gain. Sell ETC and buy more ETH – Owners can convert their ETC into additional ETH, thereby increasing their balance without requiring new capital, and without mining. Again, this allows owners to increase their holdings in ETH by 5%: a quick gain.

– Sell ETC and sell ETH – If owners sell on both chains, they can earn an additional 5% and completely eliminate any risk of exposure on either ethereum network.

Sell ETH and keep their ETC – Owners can cash out of ETH to pull their exposure out of Ethereum, but still maintain a balance of 5% on ETC.

– Sell ETH and buy more ETC – In this most extreme scenario, owners can convert all their ETH to ETC and increase their balance by 2,000% (eg if $10 = 1 ETH, then $10 = 20 ETC). If enough owners do this, and the majority balance of activity reverts back to ETC, then so too might the miners.

Reading this, you might see these scenarios as proof of an inherent flaw, or maybe as a new form of arbitrage opportunity.

But either way, it’s clear that this amount of confusion and uncertainty would be problematic if The DAO were some form of enterprise application (maybe for trading public equities), and the resulting fork led to this split.

Time may resolve the current issues, or at least bring clarity to the confusion. But in the meantime, our stance is that it’s important that all involved understand the implications and tradeoffs.

While the community has a way to sort out its issues, we believe that the last few days have reinforced the argument for well-defined, use case-specific, enterprise blockchain networks.

We feel it important to note that Nuco remains vested in and committed to ethereum. We continue to have enormous confidence in the promise of this technology and specifically, the concept of “smart blockchains” and the potential it unlocks.

Our genuine commitment to the project is the exact motivation for this piece – we wish to be responsible in the development, use and implementation of blockchain networks and applications.

Two quarters image via Shutterstock