Ethereum is Doomed

Was the hack legal? A system letting you in if you poke it just right doesn't mean you are legally allowed in. I fail to see how a bug in banking software would be any different to the bug in the DAO.

A contract-based blockchain seems very likely to me. But there's no reason that has to be Ethereum. Having had the chance to sort of ponder this over the last couple of days, I can't help but come to the conclusion that Ethereum is indeed fundamentally flawed and probably entirely unsalvageable, for all the reasons given in that blog post and more. The eventual contract-based blockchain that succeeds is going to look a lot more, well, engineered, for lack of a better word. Probably a lot more proofs of various things. Fewer features that are all individually much stronger.

In fact, there's little reason to believe that something this complicated would be done correctly the first time. Remember... Bitcoin is not the first digital currency either!

Because the point (as I understand it) of this whole experiment is that they were trying to create an altcoin that used strict contracts as the basis for transactions (with no human intervention). Essentially the code is the contract, so code behavior is necessarily abiding by its contract and anything done with that code is legitimate.

As other comments say, legality and hard failure are big differentiators here, and in fact the specific language you used invokes a really key point. Emphasis added:

>You think banks aren't hacked?

There has been a lot of general description of the individual or group that performed the splitting as an "attacker" or "hacker", but the very nature of the system in question subverts the conceptual foundation of "attacking". To be an "attack" rather then a legitimate execution of an agreement, the action would have to be "illegitimate", but when legitimacy is explicitly defined by the code itself, then how can any action allowed by the code be illegitimate? It'd be a different issue entirely if the underlying VM or a system had been exploited, but merely doing as the code allowed when the code is made the agreement's authority?

Also, I've been using "agreement" here too rather then "contract" because, despite the label of "smart contract" Etherium has adopted I think there's a basic legal question about whether legally they're "contracts" at all. A contract is a subset of the space of agreements; all contracts are agreements, but not all agreements are necessarily contracts. There are many factors in determining validity of contracts and a huge body of contract law that has already been discussed a great deal, but all that depends on there being a contract at all, and for that there needs to be an agreement where the parties intend to be bound by the law (of whatever jurisdiction whose enforcement power they wish to invoke). There are many agreements where there is no intention to have legal enforceability, and in that case the courts have nothing whatsoever to say on the matter. Contract law never even enters the picture.

The DAO, and Etherium in general, have made a big deal specifically about not invoking the courts. That was supposed to be part of the entire point of smart "contracts", that they'd have nothing at all to do with any common legal system and be self-contained in and of themselves. In turn though that could mean that any smart contract that declares itself fully self-definitional is in turn not a contract period, so there cannot be an "attacker" in the legal sense.

Bank hacks in contrast aren't much different in concept from bank heists of any other kind. They are able to invoke real world power in response, and have multiple levels of fallbacks and insurance for their customers. It's by design a much softer fail, multiple level system with an expectation of occasional failure built-in and a strong human element. This adds expense and inefficiency, but provides benefits to imperfect human societies too. It came out of ages of real world experience and testing after all.

I didn't know the language was turing complete. Isn't this computing 101? If you want a secure thing then you must be able to reason about it statically. Making things turing complete means any non-trivial property of program correctness can not have a generic solution and so you've just opened yourself up to a world of hurt.