If there’s one thing that we’ve learned over the past 30 years since the beginning of the internet it’s that it pays to not rush too quickly into new technologies. Some ideas are simply ahead of their time and when they come too early, then end up failing before they are able to reach their potential.
This is certainly the case with the next big thing since the beginning of the internet. The blockchain has produced a lot of interesting possibilities and with currency to match. But, it is still developing and it sometimes hits speed bumps.
The fact that there are so many failed coins is a testament to such. A good example is the DAO currency that was to be the ultimate in decentralized ideas. The idea was great, but the execution was awful and the coin has failed.
In this article, we will take a look at why this happened to one of the most exciting projects of the cryptocurrency era.
What was DAO
The DAO was the coin behind the concept of a decentralized autonomous organization. This is a long way of saying a company that is ruled by consensus.
The idea was that it would constitute a sort of democratic organization in which people would vote by using their coins to determine the way forward for things like investments. All of the operations of the company would be run through smart contracts.
These smart contracts are on the Ethereum blockchain which you don’t find on the Bitcoin blockchain when you do things like purchase Bitcoin, for instance.
Once the ICO (Initial Coin Offering) is complete and people have bought up the coins, the DAO is able to begin operating. People with coins will vote on how to spend the money so there is no CEO or any central organization that makes the executive decisions of the company.
Because of the unique idea, the DAO shattered fundraising records and raised over $150 million in 4 weeks.
Where it started to go bad
Before the DAO was even able to get rolling and live up to its potential, it already faced a serious problem. Hackers discovered a vulnerability in the code. They realized that they could run a sort of bot that cycled coins into their wallet.
This led to them absconding with around $50 worth of ETH. Now, because the blockchain is immutable, there would have been little recourse to getting the coins back. Once hacked there is usually little that can be done.
However, in this case there was some recourse. The blockchain went through a hard fork and the coins were frozen and then returned. Which sounds good, but it caused a deep rift in the community.
The lessons learned
While it may seem like a happy ending, it showed that the technology was still too young to be trusted in such a decentralized and democratic way. It led to some following the original blockchain called Ethereum Classic and abandoning ETH as a result.
The potential is still there to implement a company based on a DAO system, but this has cooled the enthusiasm for sucha project for now.
The post What Happened To The DAO Cryptocurrency And Why Did It Fail? first appeared on Mind My Business.