Global Networks 19, 3 (2019) 329–348. ISSN 1470–2266. Global.docx

Global Networks 19, 3 (2019) 329–348. ISSN 1470–2266.
Global Networks © 2018 Global Networks Partnership & John
Wiley & Sons Ltd 329
The soft spot of hard code: blockchain technology,
network governance and pitfalls of
technological utopianism
MORITZ HÜTTEN
Darmstadt Business School, Haardtring 100,
64295 Darmstadt, Germany
[email protected]
Abstract The emerging blockchain technology is expected to
contribute to the trans-
formation of ownership, government services and global supply
chains. By analysing a
crisis that occurred with one of its frontrunners, Ethereum, in
this article I explore the
discrepancies between the purported governance of blockchains
and the de facto
control of them through expertise and reputation. Ethereum is
also thought to exemplify
libertarian techno-utopianism. When ‘The DAO’, a highly
publicized but faulty crowd-
funded venture fund was deployed on the Ethereum blockchain,
the techno-utopianism
was suspended, and developers fell back on strong network ties.
Now that the block-
chain technology is seeing an increasing uptake, I shall also

seek to unearth broader
implications of the blockchain for the proliferation or blockage
of global finance and
beyond. Contrasting claims about the disruptive nature of the
technology, in this article
I show that, by redeeming the positive utopia of ontic,
individualized debt, blockchains
reinforce our belief in a crisis-ridden, financialized capitalism.
Keywords BITCOIN, BLOCKCHAINS, CRYPTOLOGY,
CYBERPUNKS, CYPHERPUNKS,
DAO, DLT, ETHEREUM, HARD FORK, SMART
CONTRACTS, TECHNO-UTOPIANISM
When an unidentified individual or group named Satoshi
Nakamoto (2008) introduced
Bitcoin in October 2008, most members of the cryptography
mailing list on which the
original Bitcoin whitepaper was published were sceptical at best
(Finney 2013). It was
developed as a peer-to-peer payment system to challenge central
bank control and the
incumbents of the global financial system. Despite its initially
cautious reception, over
the years Bitcoin has gained followers and gathered momentum,
for it has been fuelled
by the discontent caused by the financial crisis of 2007/8.
Aside from seeking to build a global payment system, Bitcoin is
characterized by
openness (owed to its goal to achieve decentralization), general
access for anyone
wanting to use it, and disintermediation. Bitcoin introduced not
only a transnational
payment network, but also a technology more generally capable

of tracking any type
Moritz Hütten
330
of data entry in a publicly accessible, transparent, and
immutable ledger – the block-
chain. Bitcoin is often called an ‘open’ or ‘public’ blockchain.
Various foreseeable
applications of the blockchain now stray from that path. For
example, a consortium or
private party seeking an easier, more controllable and
accountable blockchain run
(Buterin 2015) is more focused on streamlining business and
maintaining control than
on realizing a political goal. Prospective applications of the
blockchain technology, or
more generally the broader concept of the distributed ledger
technology (DLT),1 now
go far beyond transnational payments, with some observers
forecasting significant
transformations for the operations of global supply chains
(Casey and Wong 2017),
land ownership (Shin 2017), and the ‘internet of things’
(Dickson 2016). In contrast to
this outright co-optation or reinterpretation of the blockchain
technology – for a
detailed discussion, see Hütten and Thiemann (2018) – other
projects have followed
the more utopian ambitions of Bitcoin for harnessing
blockchains to promote individual
freedoms and (digital) self-determination. Public blockchains
are intended to operate

in a decentralized and distributed fashion, with participants
staying ‘honest’ through
economic incentives and proper procedures.
The emergence and proliferation of blockchain technology has
had a contradictory
reception. While some might almost celebrate Bitcoin and the
blockchain as a ‘grass-
roots’ movement and see the blockchain as a disruptive and
possibly revolutionary
technology with which to challenge the dominance of
governments and banks alike
(Swan 2015), the ‘old guard’ might not be all that troubled by
such a daring reputation.
Central banks, government agencies and the business
community might well regard the
blockchain and DLT as a promising side of research in their
quest to streamline their
activities and transition their services to the digital realm
(Economist 2015). To consider
the contradictory but expanding uptake of blockchain
technology so far, we need to
scrutinize claims about the coming ‘blockchain revolution’
(Tapscott and Tapscott 2016)
to understand how it might affect global finance and global
supply chains, and where
the utopianism of its more idealistic advocates is heading. By
analysing a crisis that hit
a frontrunner of the public blockchain technology, Ethereum, I
explore how well public
blockchains live up to their utopian ideals, and discrepancies
between the proclaimed
governance of blockchains and existing de facto control through
expertise and
reputation. I see Ethereum as exemplifying a libertarian techno-
utopianism. When the

highly publicized but faultily crowdfunded venture fund called
‘The DAO’ (an instance
of a decentralized autonomous organization) was deployed on
the Ethereum blockchain,
the techno-utopianism was suspended, and developers fell back
on strong network ties.
Throughout this article I examine how the suspension of the
techno-utopianism was
conducted and what broader implications this holds for the
future of open blockchain
technology. Adopting the blockchain without maintaining the
utopian promises of
inclusion, democratization and participation could set broader
developments in motion.
A Blockchain case: Ethereum
A highly gifted programmer called Vitalik Buterin invented
Ethereum, which is one of
the most prominent open access blockchains. In 2014, the
Ethereum Foundation, a
The soft spot of hard code
331
Swiss non-profit organization, successfully collected more than
25,000 Bitcoins (then
worth about US$ 15 million) through decentralized
crowdfunding. The foundation pre-
sold about 50 million ‘Ether’, the native token of the then to be
launched Ethereum
blockchain (Buterin 2014). While Bitcoin had already
implemented more complex

functions like timed transactions and multi-signature
transactions, it also deliberately
limited its function to process peer-to-peer payment transactions
(Campbell-Verduy
and Goguen 2018b in this issue). Expanding on the concept of
Bitcoin, Ethereum was
meant to function as a blockchain capable of processing more
advanced interactions
between two or more parties delivering a ‘Turing-complete’
programming environment
not restricted to a few selected functions. Ethereum was
designed as an open access
blockchain capable of executing so-called smart contracts. At
the time, its CCO
Stephan Tual described Ethereum as a ‘censorship-proof “world
computer” that anyone
can program, paying exclusively for what they use and nothing
more’ (Tual 2015). To
understand what makes Ethereum different from Bitcoin
requires a deeper examination
of the concept of smart contracts.
The concept of the smart contract came from Nick Szabo (1997)
and, ever since, it
has caused confusion and been criticized for its ambiguity.
While the term ‘contract’
evokes associations with the legal concept of a contract, the
resemblance is limited.
Two dominant, rough concepts are in use – smart contracts as
smart contract code, and
smart contracts as smart legal code (Stark 2016). One can
understand a smart contract
code as a complex code stored on a blockchain, which, once
created, can act autono-
mously when called on to perform an action. Such a smart
contract code might even

hold balances of cryptocurrencies or control other smart
contracts. A smart contract
code can also be called a ‘smart agent’ or ‘software agent’
(Stark 2016) to exemplify a
merger of some autonomy and/or process of automatization. A
smart legal code makes
a specific case for a smart contract code in which the smart
contract might be utilized
to automatize and streamline an exchange, but it includes some
traditional legal lan-
guage to clarify responses to unforeseen events or similar
situations. Occasionally, the
term ‘smart contract’ is used more vaguely to describe a murky
combination of both
conceptualizations; thus, it describes something that fits the
definition of a smart con-
tract code, but at the same time expects it to substitute for a
legal code driven by a rather
superficial understanding of law. Furthermore, concepts of
smart contracts exemplify
the fiction of law being a politically neutral construction, while
the law is a product of
human convictions and interaction (Milhaupt and Pistor 2008:
22).
Like Bitcoin, the Ethereum blockchain is updated by a
decentralized network of
computers called ‘miners’, which provide the computational
power to run it. Unlike
Bitcoin, however, the ‘miners’ not only authenticate
transactions, but also run the smart
contracts’ executable code. While smart contracts can in theory
operate without a
blockchain, doing so can cause problems of possible downtimes
and code manipulation
(Buterin 2013). Indistinct terms like ‘cloud’ servers obscure the

underlying physical
server architecture and usually describe the centralized server
farms that large com-
panies like Amazon or Google often run. Contrasting this
centralization of control, open
blockchains in general and Ethereum in particular are meant to
provide dependable and
distributed networks for executing transactions and more
complex programs.
Moritz Hütten
332
Beyond the presumed gains in efficiency, Ethereum promises
empowerment and
social mobility, for anyone can freely access its blockchain,
deploy programs and be
judged by the quality of his or her work regardless of formal
titles or financial means
other than access to the internet and a device like a personal
computer. In fact, the
promises of empowerment in many blockchain projects echo
earlier enthusiasm seen
when personal computers proliferated. Personal computers
fuelled the expectation that
they would put the means of production in the hands of a self-
educated working class
able to utilize these devices to climb the social ladder by
becoming advanced knowl-
edge workers (Dyer-Witheford 2015: 9). However, promises of
empowerment through
technology are often problematic and the seemingly frictionless
brave new world of

digital interaction frequently reproduces or amplifies familiar
patterns of exploitation,
elitism and exclusion on gender and racial grounds – or rather
inclusion via exclusion
creating a global precariat of cybernetic capitalism (Dyer-
Witheford 2015; Economist
2017; Huws 2014). Hence, we must ask how much the
‘blockchain revolution’ can
contribute to the empowerment of civil society, especially to its
most vulnerable mem-
bers. Algorithms are step-by-step procedures for solving
mathematical problems
predominantly by computers. While the blockchain is an
emergent technology and its
future implementation in society unclear (Campbell-Verduyn
2018a), some scholars
already suggest the emergence of a new subset of law, a lex
cryptographia, marking a
merger of legal and algorithmic governance with algorithms
structuring the conduct
and interaction of agents (Wright and De Filippi 2015).
Scholars should develop a better understanding of the visions
and convictions
embedded in this technology. In contrast to the need to separate
technology from
politics, it is important to examine blockchains as an organic
whole consisting of the
technical, scientific, social, economic and political
considerations of engineers who
combine scientific, technical and sociological analyses when
envisioning technological
innovation (Callon 1993). Nigel Dodd (2015, 2017), for
example, has repeatedly
argued that one should view Bitcoin and the blockchain as a
social movement to pro-

mote a utopian vision for society. While many techno-activists
in the blockchain
community pride themselves on creating technological fixes for
political problems, the
utopian vision embedded in this technology is anything but
apolitical. Claims about the
profound future impact of blockchains and subsequent social
advancement (Swan
2015) must be scrutinized to unearth the foreseeable and
unforeseeable consequences
and downsides that the blockchain and its utopianism might
introduce.
Cypherpunk utopias
Examining the utopianism of the blockchain demands that we
further examine the
(activist) context from which this technology emerged. Above
all, the blockchain is a
manifestation of the movement by activists called cypherpunks
who promote the cause
of digital freedom and digital self-determination secured by
cryptography challenging
government control. Cryptography is the science and study of
writing, sending, receiv-
ing, and deciphering secret messages, including authentication,
digital signatures, the
hiding of messages (steganography), cryptanalysis, and several
other fields (May and
333

Hughes 1992). Cryptography is commonly associated with
secrecy and concealing
information and identities, but it equally concerns verifying the
authenticity of inform-
ation and identity claims. Cryptography is about securely
exchanging information
while keeping hostile third-parties from eavesdropping or
manipulating information.
Ciphers are procedures consisting of well-defined steps for the
encryption or decryption
of messages. They have been around for over two millennia and
works on cryptography
often start with the so-called Caesar’s cipher, a comparatively
simple cipher encrypting
and decrypting messages by shifting letters. Cryptography has
advanced ever since to
produce ever more complex ciphers. At the onset of the
twentieth century, cipher
machines entered the scene, such as the infamous Enigma
machine that the German
navy used in the Second World War (Kruh and Deavours 2002).
Until the 1970s, advanced cryptography was predominantly used
for military com-
munication (Holden 2017). In fact, cryptography was a closely
guarded secret with
most of the research in the field conducted by the National
Security Agency (NSA) and
the export of cryptographic devices strictly prohibited (Levy
2001). However, for
various reasons, the NSA’s control of cryptographic research
weakened from the 1970s
onwards. Furthermore, as the use of computers became more
widespread there was a
growing need for secure communication for commercial use and
this created a general

demand for encryption technology. IBM produced a symmetrical
encryption algorithm
called Data Encryption Standard (DES) that would become the
US government stan-
dard, although there was some controversy over the NSA’s
involvement in developing
it (Levy 2001). This development occurred alongside the
unrelated work of two cryp-
tologists, Whitefield Diffie and Martin Hellman (1976), who
engaged the academic
community with their article ‘New directions in cryptography’
(Holden 2017; Lopp
2016). Shortly before, in December 1975, Ralph C. Merkle
published an article in
which he declared that the modern digital computer could create
ciphers that were
practically unbreakable (Merkle 1978: 1). The US
counterculture movement and the
Watergate scandal greatly increased awareness of the dangers of
insecure communi-
cation channels and government overreach (Holden 2017: 208).
Advocates of publicly
available encryption viewed cryptography as a tool for
protecting civil liberties and
individual freedoms. Later, cryptologist David Chaum (1983)
wrote about crypto-
graphically secured electronic payment systems and
pseudonymous reputation systems.
Chaum discussed how downsides of electronic payments like the
danger of a third party
collecting extensive data on individual conduct could be curbed,
while maintaining the
advantages, such as traceable proofs of payment.
Towards the end of 1992, a small group interested in data
privacy and public

accessibility to strong cryptographic tools set itself up in the
San Francisco Bay Area;
it called its members ‘cypherpunks’, a merger of the terms
‘cipher’ and ‘cyberpunk’
(Lopp 2016), the latter being a literary genre that developed in
the 1980s. Cyberpunk
merges science-fiction scenarios with the cultural pessimism
and aggressive rebellion
of punk culture envisioning a post-nation-state world in which
global networks and
transnational corporations have become the dominant forces.
Cypherpunks subse-
quently expanded into the market anarchism envisioned by
cyberpunk literature, but
counterbalanced powerful institutions and corporations with
cryptography that
Moritz Hütten
334
empowered individuals to maintain privacy and independence.
One of the founding
members, Timothy C. May, had circulated a ‘Crypto anarchist
manifesto’ alluding to
how he expected cryptography to secure individual freedom
from government control
and proclaiming that ‘a specter is haunting the modern world,
the specter of crypto
anarchy’ (May 1988). Among others, Wei Dai, a computer
engineer who developed some
of the core concepts that would form the foundation for Bitcoin,
described his fascination
with crypto-anarchy as follows: ‘unlike the communities

traditionally associated with
the word “anarchy”, in a crypto-anarchy, the government is not
temporarily destroyed
but permanently forbidden and permanently unnecessary’ (Dai
1998).
For the cypherpunks, the state was the most threatening danger
and cryptography
was the tool that would liberate them from government
oppression. In the 1990s, ten-
sion between cypherpunks and government officials built up and
resulted in so-called
‘crypto wars’ (Lopp 2016). US government officials tried to ban
secure commercial
and private encryption. Eventually, cryptography was removed
from the United States
Munitions List (USML) and this gave way to the
commercialization of and public
access to cryptography. Nonetheless, tension persisted because
the cypherpunk acti-
vists’ vision conflicted with the government’s goal to gain
authority over the internet.
John Barlow (2001), a renowned activist, founding member of
the Electronic Frontier
Foundation and former member of the Grateful Dead published
an article stating that
digital natives would self-govern cyberspace without
government intervention. While
comparatively secure encryption is still available to the public,
the smouldering conflict
with governments remained and resurfaced with the ‘war on
terror’, fuelled by fears of
terrorists utilizing secure encryption to conceal their activities.
Drawing on the bigger picture, cypherpunk ideology is nested in
the ‘Californian

ideology’ of the tech-entrepreneurs of Silicon Valley. The
‘Californian ideology’
merges the anarchism of the New Left and the entrepreneurial
zeal of the New Right
with an optimistic techno-determinism (Barbrook and Cameron
2001). However,
engineers in Silicon Valley did not start out as the resolute
capitalists they have now
become. Radio club hobbyists and various utopian communes
flourished in the region
long before the formation of cypherpunk and even before the
rise of Silicon Valley.
The radio club hobbyists had a culture of shared knowledge and
democratic beliefs.
Through their lively interaction, they cultivated a unique set of
skills and expertise
centred on building the radio devices and fostering a DIY
hands-on mentality towards
technological problems (Lécuyer 2007). Firms drew on the
expertise the hobbyists cul-
tivated and this, in turn, led to the emergence of some of the
most advanced firms in
developing microtube technologies in the region. Contradicting
modern tales of the
lonesome genius innovator, government spending heavily
backed these developments,
especially through the US military, which, until the 1970s, was
the biggest market for
advanced microtubes and the microprocessors that eventually
followed (Lécuyer 2007).
Yet, when technology advanced and microprocessors replaced
microwave tubes, an
ideological shift accompanied the technological rupture. The
earlier socialist leaning
engineers who were promoting utopian ideals of displacing the

segregation between
workers and capital gave way to a different breed of
microprocessor engineers. The
next generation of engineers was meritocratic and resolutely
capitalist (Lécuyer 2007:
335
296). Along with the need for more highly-skilled labour came
experimentation with
unconventional working conditions, an increase in flexibility,
profit sharing and new
methods of financing, all of which served to augment the wealth
of even the middle-
class engineers. The earlier dependence of these entrepreneurs
on vast government
spending to blaze the path for their technological innovations
was quickly forgotten
(Mazzucato 2015). In a similar fashion, the surging
digitalization gave rise to the
concept of masculinized ‘immaterial labour’, as perpetuated by
the male icons of the
industry, which stands in stark contrast to frequently unwaged
and underrecognized
female labour (Dyer-Witheford 2015). Highly-skilled female
labour was crucial for the
development of cryptography; for example, women working for
the Women’s Royal
Naval Service at Bletchley Park, the ‘nerve centre’ of the
British Intelligence
establishment during the Second World War, but their
importance was not fully

recognized at the time (Hicks 2017: 25).
Beneath the glamorous façade of Silicon Valley’s billionaire
owners and high-
technology labour aristocracy lies a burgeoning and precarious
labour force involved
in the dangerous and toxic work associated with the production
of microprocessors
(Dyer-Witheford 2015: 61). Much of the myth of a frictionless
process seems to stem
from forgetting about the actual physical labour in which it is
grounded. This contra-
diction seems to be right at the heart of the Silicon Valley
mindset, strikingly illustrated
by the contrast between Apple HQ, where future Apple products
are designed, and the
Foxconn factories where the actual production is happening
(Dyer-Witheford 2015:
37). Crypto-anarchism often better exemplifies this egoistic
entrepreneurial mindset
than the broader social concerns of classical leftist concepts of
anarchism.
The question then is what kind of utopia springs from this
ideological background?
Brett Scott (2014) dubbed the emergence of the blockchain the
birth of the ‘techno-
leviathan’, or the vision of a deified crypto-sovereign forming
the foundation for free
individuals interacting in a (digital) world beyond coercion.
Blockchain enthusiasts
claim that governments might still exist, but they must earn
their keep by becoming
economically rational and cost-effective (Swan 2015). While
many advocates of
Bitcoin downplay the importance of the politics involved,

critical scholars like David
Golumbia (2015: 119) argue that Bitcoin is so strongly imbued
with political ideals that
it is best analysed as ‘politics masquerading as technology’.
Marcella Atzori (2017)
highlighted the danger of hidden forms of centralization being
injected into open
networks. The reception of the blockchain technology touches
on the broader debate
on techno-utopianism vs dystopian outlooks regarding emergent
technologies such as
high frequency trading and those using big data (Campbell-
Verduyn et al. 2017). While
advocates of a techno-utopian outlook emphasize efficiency
gains and societal wealth
and raise hopes that technology might transcend politics, critics
question the neutrality
of technology and call the public to consider the dangers of
overbearing control and
opaque techno-governance (Campbell-Verduyn et al. 2017). The
debate is open-ended,
and we do not yet know how blockchain technology will
develop in the coming years;
the critiques of technological utopias that emphasize the
possible downsides of novel
technologies are highly persuasive. In the next section, I shall
examine more closely
how this ideology manifested in a concrete application.
Moritz Hütten
336
A cypherpunk utopia in the making: the case of ‘The DAO’

Over the course of 2016, a team of programmers from Slock.it,
a high-profile start-up
in the Ethereum ecosystem, launched what was supposed to be
prototypical for a newly
emerging form of democratically governed, globally operating,
decentralized organiza-
tion. The team, which sought to replace management with a
merger of algorithmic
governance and human stakeholder voting, called its creation
‘The DAO’, an acronym
for decentralized autonomous organization (Buterin 2013).
While neither Slock.it nor
Buterin made the connection explicit, the concept of a DAO is
clearly grounded in the
reductionist organizational theory of Michael Jensen and
William Meckling (1976), a
point that Wright and De Filippi (2015: 15) also raised. Jensen
and Meckling believed
it possible to reduce organizations to a nexus of human
participants and contracts.
Reducing organizations to such a bare minimum falls short of
accounting for some of
their more complex aspects and reduces agents to simplistic,
insufficiently socialized
homo oeconomini (Atzori 2017: 56), but it nonetheless lends
itself well to translation
into a formal programming code.
‘The DAO’ resembled a crowdfunded venture fund, an
experiment in organizational
governance grounded in algorithmic authority (DuPont 2018).
Much of the concept
hearkens back to the crypto-anarchism at the heart of the
cypherpunk utopia, which
envisions a world in which free and anonymous individuals

voluntarily bind themselves
to contracts of their choosing that allow them to pursue personal
wealth and advance-
ment as a society without centralized control. Echoing
Lawrence Lessig’s infamous
statement that in cyberspace ‘code is law’ (Lessig 2006: 5), the
binding agreements of
‘The DAO’ were set forth not in legal contracts, but in the form
of a programming code
deployed on the Ethereum blockchain. According to Dupont
(2018), ‘The DAO’ could
be understood as a pseudo-legal organization run by an
assemblage of human and
‘robot’ participants. ‘Robot’ participants existed insofar as
humans were meant to
interact with algorithmic rules that self-execute and
automatically respond in a
predefined manner to human input. Human agents could become
stakeholders by
investing some of their Ether, the Ethereum blockchain’s native
token, for an initial
decentralized crowdfunding phase of 28 days. In return, they
would receive tokens
representing proportional voting and ownership rights in the
DAO and granting them
access to future profits (Jentzsch 2015: 2). Between 10,000 and
20,000 people invested
in ‘The DAO’, which equipped it with about 11.5 million Ether
valued at a total of
US$ 160 million at the time (DuPont 2018). A subsequent price
hike of Ether further
increased the DAO’s holding to the equivalent of US$ 250
million.
However, to share out profits or avoid a hostile majority vote
exploiting a minority,

the DAO allowed stakeholders to split from the main
organization to create a ‘child
DAO’ under its control (Jentzsch 2015: 2). Setting up a ‘child
DAO’ was supposed to
invalidate the original DAO tokens and, after a 28-day waiting
period, allow investors
to cash in their profits or stake. Some community members
voiced concerns about the
split function introducing vulnerabilities that might allow
someone to conduct a so-
called ‘race to empty’ attack (Vessens 2016). In such a case, the
attacker would use the
split function to call repeatedly to withdraw the Ether function
before the DAO tokens
337
he or she was holding could be updated, which effectively
allowed the attacker to drain
funds without holding the corresponding tokens. While one of
the founders of Slock.it,
Stephan Tual (2016), assured the community that no DAO funds
were at risk, on 17
June 2016 someone did execute a ‘race to empty’ attack to drain
the DAO’s funds.
Analysing crisis: the failure of the DAO
The ambitious DAO experiment never got the chance to make an
investment. Shortly
after it became operational, an unidentified hacker exploited a
flaw in the code and

began to drain the DAO’s funds by launching a ‘race to empty’
attack. While the DAO
was technically a third-party project and the flaw did not
endanger the Ethereum block-
chain directly, a broad alliance of developers and stakeholders
insisted on the attack
being countered to protect the funds and demanded an
intervention to reclaim the
‘stolen’ funds on the DAO’s behalf. For ‘The DAO’, proposing
such an intervention
was highly controversial and contradicted virtually all the
public statements and
discussions that had preceded the attack.
In comparing the controversy, both Ethereum and the DAO were
very specific about
the rules of their respective projects. Ethereum’s official
website (www.ethereum.org)
describes it as a ‘decentralized platform that runs smart
contracts: applications that run
exactly as programmed without any possibility of downtime,
censorship, fraud or third-
party interference’ (emphasis added). Similar statements are
found in the DAO’s terms
of use, which claim that ‘nothing in this explanation of terms or
in any other document
or communication may modify or add any additional obligations
or guarantees beyond
those set forth in the DAO’s code. … The DAO’s code controls
and sets forth all terms
of the DAO Creation.’ Both descriptions leave strikingly little
wriggle room. Ethereum
promises a strictly neutral and immutable platform removed
from any intervention on
behalf of any third party. The DAO website clearly states that
descriptions in writing

are educational only and that the programming code alone will
determine the DAO’s
actual intention. Essentially, anyone investing in ‘The DAO’ is
supposed to agree to
the conditions set out in the programming code rather than in
any written terms of use.
While it is doubtful that such an agreement would hold up in a
court of law, the DAO
is nonetheless clear about the conditions, and in another section
warns investors of risks
including the possible loss of all funds through unforeseen
errors and attack vectors.
Some members of the Ethereum community even argue that the
presumed ‘theft’ of
funds by the hacker was not even ‘theft’ but in line with the
DAO’s terms, since they
state that whatever the code allows someone to do would be the
intention of the code.
When the attack commenced, contrary to all previous
statements, a broad alliance
calling for action emerged and sparked a battle over how to
interpret the event at hand.
A narrow majority favoured intervention, but a substantial
minority wishing to uphold
the previous statements and agreement to abstain from
intervening on anyone’s behalf,
opposed it. The latter group viewed intervention on the DAO’s
behalf as the enforce-
ment of a special group interest. The potential conflicts of
interest inherent in some
developers of Ethereum serving as both Slock.it advisors and
DAO investors further
complicated the situation. Surprisingly, the two groups clear
descriptions did little to

Moritz Hütten
338
calm the situation. Instead, both argued that they were acting in
accordance with their
original statements on their preferred option and were in line
with the ‘true’ principles
of both Ethereum and the blockchain. The DAO’s technical
specifications meant that
the attacker had to wait out the 28-day prescribed time window
before being able to
assume control of the funds by siphoning them from ‘The DAO’
to a ‘child DAO’.
Various options initially seemed feasible; these ranged from
counter-attacks by so-
called white hat hacker groups seeking to return the funds to the
original stakeholders,
a softfork to censor the hacker’s transactions and a hardfork to
dismantle the DAO
altogether. The counter-attack group was able to stall the
hacker’s attempts to gain con-
trol of the funds but was unable to redeem them permanently. A
softfork would have
required miners to refrain from processing the hacker’s
transactions and generally
would have maintained the previous status quo, but it turned out
to be unsustainable for
various reasons. Eventually, the hardforking option was
discussed. This entailed most
of the miners switching to an alternative version of the
blockchain in which the DAO
hack had been undone, thereby altering the supposedly

immutable blockchain and
permanently departing from the previous status quo.
Because of the controversial nature of either decision, debates
erupted on public
Ethereum forums like the Reddit subforum r/Ethereum. Groups
in favour of intervening
on behalf of the DAO argued for a hardfork, while the opposing
group argued against
such an intervention. Each group developed its own crisis
narrative.
A pro-fork group favouring undoing the DAO took what it
proclaimed to be a
pragmatic stance on blockchain governance. Its members
viewed themselves as rational
actors choosing self-defence over ‘zealously’ sticking to
principles (sjalq 2016),
capable of acting if needed (HoboRobo 2016), and claiming
community consensus to
be the ultimate arbiter on the proper state of the blockchain
(yeshe257 2016). They
argued that the project was still in an early stage and should be
fixed along the way.
The pro-fork group was opposed by a smaller anti-fork group in
favour of keeping the
Ethereum blockchain unchanged. This anti-fork group voiced its
concerns about ‘moral
hazard’ resulting from community intervention (Rune4444
2016), disparaged attempts
to rescue a faulty third-party project (TheBigJort 2016) and
questioned whether the
upside of intervening on behalf of the DAO could make up for
the loss in trust in the
dependability of the network (egimo 2016). It also argued that
prior statements had

stated that ‘code is law’ and that hard-forking would be a major
departure from this
agreement. Many of the arguments that the anti-fork group
presented suggest that it
viewed this intervention as a repetition of those that followed
the financial crisis of
2007/8 in which the financial authorities rescued ‘too big to
fail’ banks. Vitalik Buterin
publicly posted that he favoured a hardfork (Buterin 2016).
Various mock-posts
emerged over the following days asking Buterin to fork over
small losses that occurred
sometime in the past through various mistakes.
Despite not having formal control of Ethereum, Buterin strongly
influenced the
community with his public statement. Furthermore, forking over
the DAO prompts us
to ask if there is a conflict of interest for community members
who are supposed to be
enforcing the integrity of the system but are also often involved
in a substantial
investment. Considering all previous publicly made statements,
acting to rescue a third-
339
party contract like the DAO was deemed to be a highly unlikely
event, but when crisis
struck, commitment to prior statements proved weak. In contrast
to previous claims
about decentralization and immutability, action was and could

be taken quickly.
Closer scrutiny of the DAO hack and its aftermath reveals that
what was supposed
to represent a turning point in legal authority and algorithmic
governance (or govern-
ance by algorithms) collapsed into hurried private discussions
and governance by
narrow elite networks (DuPont 2018) in which the community
served as a weak safe-
guard. Following the decision to fork, the supposedly immutable
public ledger that is
the blockchain was altered, turning the DAO’s more complex
contract into a simple
withdrawal contract in which anybody holding DAO tokens
could withdraw a corres-
ponding amount of Ether. Consequently, ‘The DAO’ was
undone, which created what
one forum member called a very different ‘social contract’ from
the one previously
implied on the Ethereum website (carver 2016).
Many observers from the banking sector and other industries
saw this as a ‘wake-
up call’, a reminder that they should consider what the word
‘public’ means in the case
of a public blockchain (cited in Rizzo 2016). Within the
Ethereum community, many
praised the outcome of this crisis episode as an exemplification
of the great flexibility
and practicability of Ethereum, while others saw it as a
violation of principle and an
instance of censorship (DuPont 2018).
Before the fork, developers and users thought that a minority
chain might form but

would quickly become unsustainable and die out. Instead, a
minority refused the fork
and continued to maintain the original Ethereum chain,
indicating that control is more
centralized than expected but not flawless or total. The
unaltered version of Ethereum
was first seen as a mere curiosity, but the reception quickly
changed when one of the
biggest cryptocurrency exchanges, Poloniex, opened the floor
for trading a token now
called Ethereum Classic. This shocked many members of the
community by effectively
creating a market for that token (Quentson 2016). Yet, operating
as a minority chain
seriously compromised the security of Ethereum Classic. Since
the latter now operated
on a fraction of the hash rate that had previously maintained the
undivided Ethereum
blockchain, it became vulnerable to a so-called 51 per cent
attack. Some miners who
openly supported the fork of Ethereum thought that the
vulnerability was responsible
for the attack on Ethereum Classic. Chinese miner Chandler
Guo, a highly vocal
proponent of attacking Ethereum Classic, Twittered: ‘I am
Chandler Guo, a 51% attack
on Ethereum Classic (ETC) is coming with my 98G hashrate’
(Guo 2016). While no
noteworthy attack was conducted, and Guo later became an ETC
supporter (Demartino
2016), this episode illustrated the problem previously discussed
by Nicolas T. Courtois
(2014) who problematized the ‘longest chain rule’ as a source
of vulnerability for public
blockchains running on a fraction of the hash power of the
major public blockchains.

Over a year later, Ethereum and Ethereum Classic trade at
prices many times higher
than when the event occurred, and investors seem to have
forgiven that moment of
murky intervention. While the event had little impact on Ether
pricing in the short run,
one can only speculate on the future forms of public blockchain
infrastructure. Many
businesses and government agencies will certainly consider that
question in their
evaluations of what to make of public blockchains.
Moritz Hütten
340
Various forum members also reiterated the idea that this would
be a lesson learned,
but only months later another start-up, Bancor, again building
on Ethereum, collected
the equivalent of US$ 150 million in Ether, thus leaving one to
question whether
lessons had indeed been learned from ‘The DAO’. Following
these events and various
other initial coin offerings (ICO), the currently common form of
crowdfunding block-
chain projects, US regulators began to scrutinize these generous
funding rounds (Engler
2017). Even more recently, the US Securities and Exchange
Commission (SEC) has
concluded that the DAO tokens were securities and cautioned
‘market participants that
offers and sales of digital assets by “virtual” organizations are

subject to the require-
ments of the federal securities laws’ (SEC 2017).
The DAO crisis revealed that much of this presumably ‘new’
model of governance
by algorithms could resort to very conventional responses when
under stress. When the
DAO’s faults became apparent, the Ethereum blockchain’s
ostensibly binding rules
were selectively relaxed for a project with close ties to semi-
formal leaders of the
Ethereum ecosystem and various stakeholders with conflicting
interests between their
own short-term investments and the integrity of the supporting
blockchain. The res-
ponse to crisis challenged previous claims about the neutrality
of the platform and about
having overcome focal points of control. Prior to the crisis,
stakeholders and developers
had agreed to extremely strict rules by submitting themselves to
governance by algo-
rithms (Campbell-Verduyn et. al. 2017) in the form of a highly
automatized trustless
blockchain. However, once the crisis set in, strict rules did not
function as a backstop
for guiding the community response, but instead were viewed as
unreasonable and not
binding and this therefore contributed to their suspension. Some
attempts were made to
generate a measure of ad hoc legitimacy imitating democratic
procedure by posting
non-binding voting polls on various forums and blogs. The
dynamic stemmed from the
assertion that the community mistook obscured de facto control
for better and more
responsive governance (D’Onofrio 2016).

From cypherpunk utopia to capitalist dystopia
Based on the analysis of ‘The DAO’ and expanding on Quinn
DuPont’s (2018)
research, some broader implications for the proliferation and
impact of the blockchain
technology can be unearthed. Following the experience with
‘The DAO’, we can better
distinguish between the facts and fictions of the proclaimed
‘blockchain revolution’.
Open/public blockchains have become a fast spreading
technology trend, but on closer
examination, claims of a ‘revolution’ are exaggerated. Analysis
of crisis and its
response reminds us that public blockchains, like most
technologies, are subject to
political influence. Ultimately, the question is what can we
expect from the expansion
of blockchain technology when it ceases to adhere to its more
utopian promises?
To answer the question, we must remember the circumstances of
the Bitcoin block-
chain’s origins. In response to the accelerating financial crisis,
Bitcoin promoted an
alternative payment system as a critique of the selective
suspension of binding rules for
banks close to the ‘apex of power’ (Pistor 2013) that were
bailed out at the public’s
expense. More was at stake than the immediate survival of the
global financial system;

341
bailing out ‘too big to fail’ banks endangered a crucial
supporting pillar of capitalist
utopianism.
Contemporary capitalism ultimately contains its own utopian
promises, including
autonomy from society and upward mobility through
performance. The flipside of this
autonomy is the utopian notion of ontic, individualized, debt-
grounding capitalism.
Notions of debt under capitalism are very different from those
of many pre-capitalist
societies. Marcel Maus (1990), for example, describes a society
that crucially draws on
universal debt as enabling an ‘understanding of humans’
common participation in
being’ (Featherstone 2017: 64). Capitalism knows no universal
debt, and not having a
universal debt to society eventually grants the individual
autonomy from it. Ultimately,
ontic, individualized debt lays the foundation for the autonomy
of the individual at the
centre of contemporary neoliberal and libertarian thought. As
Featherstone (2017: 64)
explained:
Ontological debt is universal, infinite, and inescapable, and as a
consequence a
condition of existence itself. By contrast, the ontic version of
debt, which
emerged with the money economy and has taken on new,
democratic form in
neoliberal society, is never universal, even though it seems to

suture everybody
into the late capitalist economy, because this world is made up
of two classes,
creditors and debtors. In much the same way that this new debt
relation is
particular, it is also finite in the sense that there is a view that
eventually every
debt must be repaid in full and debtors will escape their bonds,
even if the state
of indebtedness seems to stretch far off into the future.
Contrasting the reasoning of Hobbes (1966), for whom the
sovereign must be the
consequence of an otherwise (fictional) constant state of
conflict resulting from
unbound individuals encountering each other in libertarian
thought, this conflict is
suspended through the notion of open space. The blockchain
sets the foundation for a
pre-political society of individuals who are not yet citizens
(Atzori 2017: 55). Liber-
tarian thought does not seek to move on to citizenship but
remains in a pre-political
state that suspends conflict through notions of open space. The
latter are crucial for
libertarian fiction, whether it is science fiction set in space, the
open space of the
imagined Wild West, or unbound cyberspace (Mühlbauer 2006).
Unable to resolve
emerging conflicts because of its distaste for political
institutions, libertarian ideology
must press forward in search of new frontiers to colonize. At its
inception, Bitcoin was
lauded as a libertarian revolution freeing the individual from
government oppression
(Cox 2013). Originally, in nineteenth-century Europe,

‘libertarian’ was synonymous
with left anarchist, but since then and following the Second
World War, market radicals
began to occupy the term and to shape something one could call
‘anarchism for the
rich’ (Mühlbauer 2006: 156). David Golumbia (2015) analysed
Bitcoin as a ‘distributed
right-wing ideology’. Guardian reporter Jonathan Freedland
identified the surging fel-
lowship of Ayn Rand among the young tech-entrepreneurs
intrigued by her lionization
of ‘the alpha male capitalist entrepreneur, the man of action
who towers over the little
people and the pettifogging bureaucrats – and gets things done’
(Freedland 2017). For
Moritz Hütten
342
the heroes of Ayn Rand’s stories, even the market is too much
society to deal with in
that it hampers the unbound self-realization of the towering
individual (Mühlbauer
2006: 160). However, this fascination with zealous, genius,
entrepreneurial libertarian
thought is precisely what fuels admiration for a reckless elite
and lends itself to authori-
tarian models (Mühlbauer 2006: 159).
The global financial crisis created a situation that transformed
private debt into
(almost) universal societal debt. The future horizon of unbound
debt repayment was at

the brink of collapsing into a primordial state of unbound
universal and unpayable debt
threatening the very core of neoliberal and libertarian autonomy
from society. Various
commentators make claims about the disruptive and even
revolutionary nature of the
blockchain. Yet, on closer examination, for Bitcoin and the
blockchain, ‘revolutionary’
does not mean a challenge to capitalism but a challenge to its
demise. At a point when
the global financial system threatened to sink into universal and
unaccounted debt with
nobody knowing who owed what to whom, Bitcoin and the
blockchain emerged as a
promise of perfectly tracking every transaction and account
balance in existence. More
than anything, Bitcoin and blockchain technology promise to
rekindle belief in indi-
vidualized, ontic debt and, subsequently, the autonomy of the
individual at the heart of
neoliberal and libertarian thought. Ethereum followed the same
utopian vision on a
higher level of abstraction, essentially treating payments as a
subclass of contracts. It
promised to create a network automatically governed by a
predefined protocol, forging
a globally accessible opt-in society of individuals. The
utopianism of Ethereum is much
closer to the term ‘friction-free capitalism’ that Bill Gates
(1995) coined.
David Golumbia (2015: 121) describes Bitcoin as a programme
for ‘recruiting unin-
formed citizens into a neoliberal and (nominally) anti-
government political discourse’.
Bill Maurer (2016) concluded that financial professionals like

to see the blockchain as
a tool for ‘re-risking’ finance so that it can move away from its
‘boring’, intellectually
unstimulating fee business model. Overall, we must understand
that the ‘blockchain
revolution’ often fails to disrupt the neoliberal discourse but
rather contributes to its
redemption and to the wider ‘non-death of neoliberalism’
(Crouch 2011). Supporters
of Bitcoin or Ethereum might not feel troubled by that insight at
all, for many are
sceptical of government control and endorse the ‘free market’.
Yet, these supporters
also turn to public blockchains like Ethereum or decentralized
applications like ‘The
DAO’ to deliver the infrastructure necessary for a brighter
future under ‘friction-free
capitalism’. Such expectations might turn against them when
technological solutions
fail to produce the desired results. Without the ambition to
build better institutions on
the blockchain, or when governance failure and murky decision-
making processes are
mistaken for ‘better’ governance, the ‘blockchain revolution’
might yield very disap-
pointing results for its advocates. Eventually, public
blockchains also face a recurring
problem over the process of digitalization. When processes
become digital, ‘tired’ ideas
often become repackaged as ‘wired’ ideas (Ludlow 2001: 20).
Brett Scott (2017)
recently criticized the concept of the sharing economy for being
simply an obscured
granular rent economy. When more utopian and ambitious
projects like ‘The DAO’
fail, the more ‘tired’ ideas remain fuelled by a technology that

promises perfect score
keeping in the form of an incorruptible ledger without living up
to the expectations of
343
a techno-utopia. Without thoughtful consideration of how to
live up to ambitious goals
of democratic participation and freedom from coercion, the
blockchain risks rebranding
relationships of capitalist exploitation into ‘wired’ euphemisms.
We see the transform-
ation of granular rent extraction into fancy micro-payments, and
old-fashioned com-
modification into blockchain tokenization. At the same time, the
familiar patterns are
perpetuated, such as the financialization of the everyday (van
der Zwan 2014), attempts
to exploit new markets for financial products by banking the
unbanked, or the formaliz-
ation of landownership in rural communities. Eventually, the
blockchain could become
not only the fixture for financial practice in the narrow sense
Maurer described through
re-risking finance, but in a broader sense for capitalist utopia by
rekindling unrealistic
expectations about future repayments of individualized, debt
and unlimited commodi-
fication.
Conclusion

In a recent interview, Christoph Jentzsch, a DAO inventor,
criticized the blockchain
developers’ for having become overly conservative since the
DAO’s failure. Many
projects have become more centralized, and most of the recent
wave of ICOs have been
greatly overfunded (Bergmann 2017). Technological
advancement was long accom-
panied by a hope that technology would not only streamline
politics, but also possibly
transcend it altogether. Yet, examining the crisis response to
‘The DAO’, hopes of a
management-free system were disappointed because the
response to crisis revealed
strong de facto control by a programmer elite and weak
commitment to principle when
facing possible short-term losses by the community. Eventually,
the public blockchain
was all too human at its core, forming indeed the soft spot of a
utopia of governance by
hard code. The response to the crisis revealed that the public
Ethereum blockchain has
not transcended politics. The lack of proper procedures instead
leads to a mimicry of
the murky interventions that sparked discontent with the
financial system. The outcome
is in no way confined to the Ethereum blockchain, and after
studying Bitcoin, other
scholars (Atzori 2017; De Fillipi and Loveluck 2016; Musiani et
al. 2018; Pelizza and
Kuhlmann 2017) have reached similar conclusions.
Pre-crisis commitments to strict governance by algorithms and
the credo that ‘code
is law’ failed to hold up under pressure. Rather than supporting
the community in

troubled times, the strictness of the rules hampered the
development of proper pro-
cedures with which to handle the events. Under unforeseen
circumstances, the commit-
ments were viewed as overbearing and unreasonable, and
ultimately fuelled the
impression that compliance with the code was unrealistic. While
some community
members criticized the opaque elite governance, others mistook
the quick response for
dynamic decision making. The DAO episode also casts doubt on
the capacity of open/
public blockchains to overcome the selective favouritism that
originally fuelled
discontent with the financial system and left some forum
members wondering how big
a project must be before the developers intervene on its behalf
(andypant 2016).
More broadly, the old ideas and new crises that spread through
technology pose
implications for global finance and beyond. Increasingly,
transnationally operating
Moritz Hütten
344
actors in the blockchain ecosystem work with policy makers,
governments and firms
around the world. While not long ago blockchains were
primarily a source of concern
for politicians, lawmakers and regulators, these actors are
increasingly embracing a

widespread use of its applications and forecast its possible role
in ‘revolutionizing’
governance, democracy and the rule of law (Mizrahi 2017).2
Consequently, the pro-
claimed blockchain ‘revolution’ merely becomes the evolution
of the very institutions
that Nakamoto, Buterin and others had meant to challenge.
Finally, this development also holds implications for the
utopian aspects of block-
chain technology. It is said that blockchains possibly improve
the way services,
public administration and companies are organized; they can
make them more
efficient and more decentralized, but only if we understand
them as a tool with
limitations and not as a replacement for political debate. We
must keep in mind that
technology cannot be a substitute for conscious debate on how
democratization,
inclusion, emancipation and self-determination can be achieved.
Opportunities for
empowerment must be created and defended; they are not a by-
product of technology.
Technology gadgetry cannot replace political struggle. The
DAO crisis was a missed
chance to have such a debate, with many discussants simply
claiming that the
technology was still new and would perform better next time. It
was also a missed
chance to think about the underlying techno-libertarian ideology
and utopianism. Yet,
critical debate must be injected into the blockchain community
to challenge the
inherent flaws and contradictions of the underlying ideology.
My examination of the

utopianism of Bitcoin that is still evident in various blockchain
projects like Ethereum,
reveals the dangers that originate from this utopianism and the
now common framing
of the blockchain as a powerful accounting tool. The blockchain
runs the danger of
becoming a fixture for the crisis of financialized capitalism,
rekindling a belief in
clearly bounded ontic debt with a promise of perfect accounting
without bringing about
better, more open and inclusive institutions. Instead, the
blockchain could drive a belief
in the moral virtue of ‘tired’ ideas of capitalist rent extraction
and exploitation under
the guise of ‘wired’ ideas of digital inclusion, radical
entrepreneurship and unhampered
self-realization.
Acknowledgements
I am grateful to Max Nagel for contributing to a presentation on
the topic at the 2016 Intersections
of Finance and Society Conference in London. I also thank
Malcolm Campbell-Verduyn for his
insightful and thorough comments on an earlier draft.
Notes
1. Because the technology is new, the terminology is not yet
fully established. Sometimes the
terms ‘blockchain’ and ‘DLT’ are used interchangeably; at other
times DLT is used as a more
general term for a distributed ledger but without any clear
indication of whether it is indeed
a blockchain.

2. This exemplifies the development in the EU, yet this
development is in no way confined to
the EU.
345
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