Old scam
Despite 100 years of knowledge and warning, idiots still fall for this shit. Fortune-ately these idiots are rich, so their loss is a net gain for civilization......

News emerged Friday that The DAO, a venture capital fund operating through a decentralized blockchain inspired by Bitcoin, had been robbed of more than $60 million worth of Ether digital currency, or about 1/3 of its value, through a code exploit.

And it's not just a hack, it's a mathematical proof showing that the entire operation CANNOT work as advertised. Thus the entire operation is an intentional fraud.

The DAO has been touted as the first major implementation of a Decentralized** Autonomous Organization, a financial organization underpinned by so-called “smart contracts,” written in computer code and enforced through a blockchain which controls investors’ digital currency holdings.

In short, the DAO is meant to eliminate lawyers and other humans from contract negotiations and financial dispute resolution. That possibility, along with security advantages, has contributed to major banks’ surging investment in blockchain technology.

But by finding an unintended code exploit, the DAO hacker has called into question the core idea that code can substitute for human-dependent legal and financial processes.

Foolish blockchain investors really ought to watch these two episodes of Racket Squad. There's nothing new about the Blockchain scam. Set up a system under the scammer's control, a system that appears to move lots of money around without human checking. After the mark is convinced that the system favors him, snatch the money and run.

Much as I enjoy the vengeful image of homeless starving lawyers overdosing on Oxy, the simple fact is that human checking and human feedback can stop frauds. Lawyers who write and inspect contracts are not the same as predatory prosecutors and ACLU lawyers. I can't get properly vengeful against bookkeeper types.

Putting it another way: There's no such thing as 'untouched by human hands'. If the part of the system available to you looks robotic, it means you are unprotected from the trickery of the humans who developed the system. They paid lawyers to guarantee that you don't get a lawyer. They paid auditors and coders to guarantee that you can't use an auditor or coder.

= = = = =

** Let's return to this word DECENTRALIZED, which is the CENTER of the blockchain fraud. You CANNOT be decentralized when you are using the Web. When you are operating through the Web, you are connecting to the NSA, and you are also opening yourself to spies and hackers of all types. Blockchain methods are the most centralized of all, since all parties to the whole blockchain must participate in every transaction. The only way to have a decentralized transaction is with PAPER currency and PAPER contracts. If you want to be really safe, write the contract by hand or on a free-standing mechanical typewriter. PAPER doesn't automatically send signals to NSA. It is simply exchanged between the two parties, usually with copies deposited in locations trusted by both parties.

Labels: defensible spaces, Emersonian justice

  ¶ 2:16 AM