Market-based Security for Distributed Applications

Abstract

Ethereum contracts can be designed to function as fully decentralized applications called DAPPs that hold financial assets, and many have already been fielded. Unfortunately, DAPPs can be hacked, and the assets they control can be stolen. A recent attack on an Ethereum decentralized application called The DAO demonstrated that smart contract bugs are more than an academic concern. Ether worth hundreds of millions of US dollars was extracted by an attacker from The DAO, sending the value of its tokens and the overall exchange price of ether itself tumbling.