The application of blockchain has undoubtedly captured the imagination of the commercial world. In our previous blog on blockchain, we discussed ‘The DAO’, a Decentralised Autonomous Organisation, as a demonstration of how blockchain could be used to revolutionise the way business is conducted. If you missed it, have a look here. We also explained the basics of blockchain in our first blog of the series here. However, while there are many exciting opportunities offered by blockchain technology, there are of course risks to consider.
The DAO was set up without a governing body or documents to be funded to invest in other business proposals. The DAO raised over the equivalent of US$150 million in the cryptocurrency ‘ether’, in just 28 days, reflecting a widespread optimism about the blockchain technology. In June of this year, however, The DAO was ‘hacked’ and US$50 million (post-theft valuation) was siphoned from The DAO into the wallet of an anonymous hacker, before users’ eyes. Significantly, at the time of the hack, The DAO held 15% of all ether, leading to a rapid devaluation of this cryptocurrency from over US$20 a unit to below US$13.
The attack is said to have occurred through the hacker’s manipulation of a ‘recursive call bug’ in the code of The DAO.