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Some background (Taken from Quartz):

Ethereum is similar to bitcoin, but it also supports smart contracts, agreements written in computer code that execute automatically when conditions are met.

Distributed Autonomous Organization (DAO) sought to build a humanless venture capital firm that would allow the investors to make all the decisions through smart contracts. It was one of the biggest crowdfunding effort in history. For Ethereum, the backbone of the project, it was a major vote of confidence in its nascent technology.

Then it got hacked, when someone started siphoning money out of the DAO. By the end, the hacker, who has said that he was simply taking advantage of a technical loophole in the DAO, had amassed $50 million in ether, based on current exchange rates at the time. While the core developers who designed and run Ethereum didn’t really have anything to do with the DAO, they were left to deal with the mess, so they decided to hack the hacker.

They managed to stop the theft and move the funds into another smart contract where they currently sit: a temporary fix. The way the code of DAO was written, there is a question of whether the original hacker can still lay claim to the funds. Fixing this would require more intervention from the core developers.

Whether to do so has created an existential question for Ethereum. One of its underlying tenets is that it’s a decentralized platform, meaning the power lies almost exclusively with all of its users. By stepping in to fix this problem, it would completely undermine that objective. This has led to a heated debate between those who want to return the funds and others who say that the the power of smart contracts lies in their immutability.

Doing so would basically eliminate the DAO, and move all the money into a smart contract that can only reimburse investors. The initial proposal was a soft fork where a majority of the Ethereum miners could voting on the roll back. Unfortunately, a security flaw was found in the voting process, which eliminated this option.

That leaves a hard fork, where the core developers of Ethereum unilaterally make the decision to essentially create a new version of the network with different rules than the original. Then, miners, exchanges, and other major apps that are built on it need to decide if they want to a part of the new version of Ethereum or the original.

  • 2
    Could you put the part from Quartz in blockquotes? It would make it easier to see which part is the article, and which is your question. – Jestin Oct 26 '16 at 16:57
  • There is only one question listed. What are the other questions you are referring to? All of the verbiage after the question is background, as stated prior to it, Everything after the colon is taken from Quartz, hence my notation. – user2716556 Oct 26 '16 at 17:00
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Yes, Bitcoin could also be subjected to a hardfork. In fact, there are members of the Bitcoin community that feel so strongly that the blocksize should be increased that they are proposing to do just that:
They are working on a version of Bitcoin that is incompatible in regard to the current consensus rules of Bitcoin forcing a permanent split of the blockchain into two. They surmise that their vision for Bitcoin will have greater support than the road map followed by the Bitcoin Core developers and expect to oust the original chain completely.

As they (IMHO) appear to overestimate the support for their project, I don't expect the latter to come to pass.

As Mindwin has pointed out in the comment rightly so, the Bitcoin blockchain has actually forked before by accident: See , or Bitcoin Magazine's report.
There have also been previous forking attempts, such as the ones pushed for by Bitcoin-XT and Bitcoin Classic.

  • Regarding forks, It has (1) already happened (2) in the past. – Mindwin Oct 26 '16 at 19:59
  • @Mindwin: Good point, I've updated my answer – Murch Oct 26 '16 at 20:06
  • Be my guest, glad it was useful. – Mindwin Oct 27 '16 at 10:41

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