Ethereum and lessons on how to wreck a decentralized system

For what has been billed as a decentralized platform for smart-contracts, Ethereum is proving surprisingly amenable to central control. It turns out that when push comes to shove and a too-big-to-fail Ethereum application appropriately called The DAO is on the verge of losing all investor money, proponents of trustless systems start agitating for interventions and bailouts that would make Bernanke blush.

With damage toll from The DAO attack at 3.5M ether and counting, Ethereum team is gearing up to introduce a generic blacklist for Ethereum clients to stop the stolen DAO funds from being cashed out. Starting with the vulnerable DAO contract itself, this blacklist will contain the list of “bad actors” on the network who will be prevented from participating transactions and for good reasons- after all somebody said they are bad people.

But in the security field it is well-known blacklists are a fragile design. Trying to enumerate all known bad actors in a system without a strong notion of identity is playing a game of whack-a-mole. Banned miscreants disappear and reappear under a different pseudonym starting over with a clean reputation. It is much better to whitelist known good entities and only let those people into the network than trying to kick out bad apples after the fact.

So if the objective is to destroy the decentralized nature of Ethereum by exerting control on who gets access to the network, here is a proposal for doing it far more effectively and in a scalable way:

  • Today anyone can participate in the Ethereum network by generating a cryptographic key. Your network “address” is derived from the public key. Armed with an address, users can send/receive Ether from other participants, launch new contracts or interact with existing ones. That’s not good. How can we distinguish the good guys in white-hats from the bad guys in black-hats if the hoi polloi are allowed on the network without so much as a background check?
  • Instead let us require that all Ethereum public-keys be certified with an X509 certificate,issued by a trusted third-party CA after vetting the identity of that person. This the same system that underlies confidence in the web. It guarantees that when consumers visit a dubious website asking for their bank login, they will feel much better after being tricked into giving it away.
  • There is undeniably some “friction” involved in getting certificates (Compounded by the fact that the enrollment process will only work on Windows XP at the outset.) It is necessary to incentivize users to stick with the righteous path. To that end, all Ethereum wallets will display a shiny padlock icon when they receive payments from a certified contract.
    • To be clear: certified Ethereum addresses do not receive any preferential treatment from miners, nor are any safer than plain uncertified addresses. It remains a core principle that all Ethereum addresses are equal. But some are more equal than others.
  • Certificate issuance is a very competitive low-margin business for CAs, with a race to the bottom in prices. In order to help boost CA bottom-lines, an enhanced type of Ethereum certificate called Extraneous Validation or EV will be introduced requiring consumers to submit DNA samples for highest assurance levels. (Privacy concerns will be allayed by discarding those samples without actually checking them, in keeping with the traditional standards of CA due-diligence.) EV rating will naturally include a premium user experience too: compliant wallet software shall display full-screen animation of coins raining down from the sky whenever EV addresses/contracts are printed.
    • In addition, transactions involving EV addresses must be stored at lower  regions of the process heap. Higher memory locations are akin to nose-bleed seats and unworthy of favored Ethereum contracts.

It is expected that the Ethereum Politburo will take up this proposal as part of their next 5-year plan.

Long live the decentralized revolution.



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