Ethereum co-founder and long-time blockchain contributor Charles Hoskinson recently appeared on an episode of Coinscrum’s Members Club series, where he discussed Ethereum’s potential hard fork to compensate those affected by The DAO. Hoskinson highlighted numerous problems that existed with The DAO from the start and explained why he believes a hard fork would be a mistake.
Although Hoskinson was one of Ethereum’s original eight founders, he left the project in June 2014. He now serves as CEO of Input Output, a Hong Kong-based financial technology firm that develops cryptocurrencies and blockchain solutions for clients.
The Problem with DAOs and Smart Contracts
Before delving into The DAO specifically, Hoskinson spoke about smart contracts more broadly. He acknowledged that decentralized autonomous organizations (DAOs) can be useful and even proposed the idea of a DAO for Bitcoin development that would allow the community to directly fund protocol changes.
After outlining the positive aspects, he described a central weakness of these new financial instruments: human-designed algorithms are vulnerable. “These ideas are encapsulated with thousands of booby traps, cobras, and other terrible things,” he said. “Why? Because they involve people. Algorithms are really dumb, and people are really smart. If a human designs an algorithm, then there’s going to be a human that’s really good at designing a way out of that algorithm to steal funds. That’s exactly what happened with [The DAO].”
Smart contracts remain very difficult to secure in this early stage. Security experts warn there could be more costly failures built on Ethereum down the line. Projects such as Rootstock, a Bitcoin sidechain with Ethereum-like capabilities, have advocated “progressive decentralization” as a way to mitigate these risks.
The Many Problems with The DAO
Turning to The DAO, Hoskinson criticized the decisions behind its design and deployment. He said some developers chose to maximize decentralization without implementing safeguards or accepting personal liability. They produced code in a language that offers limited formal guarantees (Solidity), released it without limits, and allowed more than $150 million in value to accumulate—effectively betting that the general public would manage those funds better than experienced investors.
He acknowledged the “wisdom of the crowds” argument and the right of people to participate, but noted a practical issue: high-quality code review often only happens when large sums are at stake. In The DAO’s case, the substantial funds turned the contract into a massive bug bounty that attracted scrutiny only after the fact. The same dynamic has affected Bitcoin, where increased market value led to more attention on security.
“The problem is that code didn’t behave the way they intended,” Hoskinson said. “The philosophical question, and this is the fundamental of a DAO, is when you turn the driver’s keys over from a Ferrari to a machine, you have to sometimes accept that the Ferrari is going to kill people. And you have to accept those consequences.”
The question of whether the Ethereum community should accept the consequences of a flawed smart contract has given rise to a push to hard fork the blockchain to return funds to DAO token holders.
Why Ethereum Should Not Hard Fork
Hoskinson strongly opposed reversing Ethereum transactions to reverse the effects of faulty smart contract code. “When you start intervening, it kind of diminishes the entire purpose of these types of systems in general,” he said, adding that intervention introduces a moral hazard around when and how such decisions are made.
He pointed to other incidents—such as the hack of the cryptocurrency exchange Gatecoin—and asked why the community did not hard fork in those cases to revert losses. He also raised the broader question of whether the Ethereum community should compensate users who lost access to wallets, asking where intervention should stop.
Hoskinson also addressed a sensitive perception within the community: why should users who lost funds in other ways be left uncompensated while those who invested in The DAO might be reimbursed? He suggested this concern is intensified by the close relationships between some DAO backers and the Ethereum Foundation.
While many in the Bitcoin community believe bailing out DAO token holders undermines the core principles of a blockchain, Hoskinson pointed toward an opportunity: a new generation of blockchains can build governance into their design. He mentioned projects such as Tezos as examples of systems that explicitly incorporate governance models, and noted that governance mechanisms could also be retrofitted onto existing public blockchains like Bitcoin and Ethereum.