Ethereum Blockchain Forks to Return Stolen Funds

Blockchain split up
Illustration: Hermin Utomo/Alamy

Remember that $60 million dollar blockchain heist that made headlines last month? You know, the one that threatened to throw the Ethereum project (the most successful cryptocurrency after Bitcoin) off the tracks? Well, as of today, it has all been magically fixed. On Wednesday, the users, miners, developers, exchanges, and everyone else who matters on the network embraced a fork of the Ethereum software. That effectively confiscated all of the stolen funds and placed them into a new account programmed to automatically reimburse victims of the theft. 

The maneuver, which was the focus of much philosophical and technical debate, seems to have worked well enough to call it a success. However, not everyone in the network went along with the fork. There are now two versions of the Ethereum blockchain growing in tandem—one (ETH) with the updates to the stolen funds and one (ETHC) that keeps everything as it was. You can see both chains growing here. About 15 percent of miners have continued to mine new blocks on the original Ethereum blockchain. However, none of the major online exchanges are listing or trading the coins generated on the un-forked chain. And so, it could be argued that at this point that those coins have no real value.

The forked chain, on the other hand, is performing well on exchanges. The price of Ethereum’s native currency, Ether, crashed right after The DAO—a smart contract-enabled investment fund—was hacked and drained of 3.6 million Ether. It now seems to be making a slow recovery.

A 13-percent increase in the market value of Ether does indeed signal a renewed faith in the overall viability of the Ethereum project. But, even as it seems to have been a success, the bailout of The DAO is likely to generate a lot of much needed discussion. The hard fork Ethereum pulled off this week marks the first time a protocol change has been written and adopted with the explicit goal of confiscating funds. Next week, we will take a look at what kinds of precedents this could set, both in terms of how the Ethereum community makes controversial decisions and what kinds of social intervention users will accept.

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