IS IT theft if no rules are broken? That is what users of the DAO, a futuristic investment fund, were left pondering after June 17th, when an unknown attacker made off with around 3.6m “ether”, an online currency similar to bitcoin. As cyber-heists go, it was a big one: the ether were worth about $55m at the time of the attack, about a third of the DAO’s assets. But the DAO, which stands for Decentralised Autonomous Organisation, does not have rules as such, or staff to enforce them: instead, it has computer code, which is supposed to embody its purpose and to operate automatically. If the attacker found a flaw in the code, whose fault is that? Indeed, some cyber-libertarians are arguing that whereas the heist was not a crime, altering digital ledgers to retrieve the lost ether would be an affront to the whole project.

Like bitcoin, ether relies on a “blockchain”—a public ledger, distributed among lots of the system’s users, which records all transactions. Bitcoin’s blockchain handles mainly financial transactions, but ether’s can run computer code, including self-executing “smart contracts”, like those underpinning the...Continue reading