Bitcoin developers warn that Ethereum hard fork sets disturbing precedent, affecting the entire industry

The Ethereum ecosystem is now returning to normal after an attack last month that resulted in the loss of nearly $60 million in investor funds controlled by an unknown group or individual.

The ‘theft’, as some called it, was ultimately reversed via an ethereum hard fork, a code change approved by an informal community vote that effectively moved the stolen funds to a new account from which investors could withdraw their original investment.

But while the immediate impact of this event was limited to the Ethereum platform, the repercussions of the fork have spread throughout the blockchain community, affecting everyone from the Ethereum community to bank consultants looking to create private blockchain solutions.

Among those who joined the discussion were bitcoin software developers, many of whom publicly stated that Ethereum’s decision not only permanently changed the value proposition of its platform, but also generated negative publicity that could hurt all blockchain applications.

Unlike traditional database technology, one of the most outstanding features of blockchain technology is that its transaction ledger is distributed to all users, allowing participants to trust that the credit and debit records they are using are the same as everyone else.

But these developers and infrastructure architects are increasingly concerned that now that Ethereum has set a precedent for consensus based on individual leadership, other blockchains may be forced by regulators to make additional changes.

“The Ethereum hard fork could have a very negative impact on Bitcoin because it sets a precedent by providing an option to deal with failures that reset the blockchain in the opposite direction,” Bitcoin Core contributor Peter Todd told Coindesk. “This calls into question the permanence of all blockchain systems.”

Self-fulfilling prophecy

Todd isn't the only one who has concerns.

Eric Lombrozo, a bitcoin developer, is also troubled by the possibility that investors and regulators might view the Ethereum hard fork as proof that other blockchains can also hard fork.

Lombrozo, an early contributor to the ethereum project, said the democratic process for reaching consensus is more diverse because so few people vote.

The fact that a minority of Ethereum users continue to mine on the original chain under the previous consensus rules has some pointing to the inherent difficulties of digital consensus, with some even questioning whether a distributed ledger is a ledger at all, given its susceptibility to modification by social forces.

Lombrozo concluded that Vitalik Buterin and other influential figures in the Ethereum community could change any decision from voters.

Lombrozo said it was not surprising that the hard fork was ultimately decided in this way.

"A small group of people can financially pressure others to vote yes or no to suit their long-term political interests."

He later said that the problem was not the hard fork, but the way it was decided, likening it to a bailout that went against the fundamental principles underlying the Bitcoin network.

“Even without a hard fork, we can do this, which is unthinkable for Bitcoin,” he said.

Set a precedent

Coin Sciences founder Gideon Greenspan worries that this top-down structural influence could ultimately cause digital currencies to struggle as an investment vehicle.

Greenspan, who is currently building an open platform for creating, managing and deploying blockchains, worries that if ethereum smart contracts become “a popular investment tool” in the future, the precedent could lead to “endless debate.”

He added: “My personal opinion is that this hard fork was a wrong decision in the long run. It created an expectation that this kind of fork might happen again in the future, and maybe next time the smart contracts won’t work as expected.”

These statements echo Buterin, who said the community must be cognizant of the expectations this hard fork brings to users.

Bitcoin fork history

The question of whether Bitcoin has ever intentionally performed a hard fork has been a matter of deep debate in the community.

In March 2013, Bitcoin had an unintentional hard fork that was later fixed by the Bitcoin community. In addition, there is debate over whether Bitcoin founder Satoshi Nakamoto executed a hard fork in the early days of Bitcoin, before Bitcoin had any market value.

Todd drew a distinction between bitcoin’s earlier hard forks and ethereum’s hard forks on Wednesday, distinguishing the amount of money involved in the projects when the divergence occurred.

While Ethereum had a market cap of around $1 billion when it hard forked and more than 10% of the funds were locked in The DAO, the situation was quite different when Bitcoin hard forked.

He said: “Back then, the market value of Bitcoin was 0.”

“When you’re in danger and you don’t have a penny, you can do whatever you want, it doesn’t matter.”

A chance to learn

The concerns of bitcoin developers may not be surprising, given the implicit competition between blockchains for adoption, and even the eventual coexistence of multiple blockchains.

An influential observer of digital currencies, Cornell University professor Emin Gün Sirer, said the mood in the ethereum community following the hard fork was “generally quite positive.” At a recent ethereum developer conference he co-hosted, he spoke of the community’s ability to reach consensus using the blockchain as a sign of strength.

Gün Sirer, a vocal critic of The DAO for releasing unreviewed code to the public, saw the hard fork as a learning opportunity.

“Through this incident, not only Ethereum, in fact, not only smart contracts and Ethereum systems, but Bitcoin can also learn a lot.”

In particular, he cited ethereum’s long-running bounty program for coders to help find network bugs as a model from which bitcoin could learn.

“Cryptocurrencies without bounties are very vulnerable, and I don’t know of any bounties for Bitcoin, so they are very confident in their abilities and very arrogant, and don’t seem to have a bounty system set up.”

Another Bitcoin supporter took a different stance, but still expressed the possible impact of this hard fork on Bitcoin.

Christopher Allen, chief architect at bitcoin sidechain startup Blockstream, joined Todd and Lombrozo in the discussion, saying that the hard fork decision, which appears to be agreed upon by the ethereum community, is in its best interest and that ‘every answer has risks associated with it’.

He also said that if a hard fork is not implemented, it could lead to regulatory intervention, which would affect all digital currencies.

After expressing some support for the hard fork, Allen tempered some of the similar concerns that the hard fork could have long-term effects on other aspects of the industry.

“One way or another, this hard fork affects us,” he said. “Let’s put it this way, if nothing is done, everyone loses their funds and the attacker succeeds in getting his ill-gotten gains. This will cause a lot of problems from regulators and others, which could have a bad impact on Bitcoin.”