The Creation of Ethereum Light
In 2016, a group of intelligent people got together and created what was known as a Decentralized Autonomous Organization (DAO). It was built to function as an investment fund, and invest allocated funds from other investors via a predetermined method, essentially automating the concept of a hedge fund or investment fund. It ran on the ethereum blockchain, was not owned by any person or company and belonged to no country, and thus had no managers making decisions on it’s behalf – which also meant no management fees.
In theory this concept is ideal, since it allows all investors to partake in an investment strategy without the high costs of dealing with a fund and be treated fairly among all fellow investors. Long story short, the launch of the DAO was a huge success, setting a record for the largest token fund raising in history.
Shortly thereafter, however, certain users found a flaw in the code and were somehow able to embezzle a large portion of the accumulated funds for themselves. The total amount extracted by the thieves amounted to somewhere around 15% of all Ether in circulation, and since the blockchain is immutable, those transactions were irreversible. Naturally, this came as completely unexpected and was a huge shock to the growing crypto community.
In cyberspace, there is a general rule that states ‘code is law’, explaining that code cannot distinguish right from wrong and simply executes as it was designed. This suggests that the outcome of executed code must be accepted, regardless of whether or not it caused harm to any parties involved.
The argument the community brought forward, however, was that the smart contract was never intended to pay out a select few individuals, and this was a serious case of embezzlement due to its size – detrimental to the future of the blockchain, and should be revised by all participants in the blockchain. Eventually what followed was a consensual agreement by the community to remove those transactions from the blockchain, pretending they never happened.
This decision didn’t sit well with many and the community split into two groups. Some felt that although the theft was unethical, it in fact did occur and should not be revoked. Others felt that the right and just thing to do was discredit the transaction and reimburse those who were victims of the theft. Ultimately, the blockchain split into 2, and there now exists 2 versions of the Ethereum blockchain; the Ethereum blockchain with the felonious transactions deleted, and the version left unchanged where the transactions still occurred, also known as Ethereum Light.