ETHEREUM

ETHEREUM

Ethereum is an open-source, public, blockchain-based distributed computing platform featuring smart contract (scripting) functionality. It provides a decentralized Turing-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. Ethereum also provides a cryptocurrency token called "ether", which can be transferred between accounts and used to compensate participant nodes for computations performed. "Gas", an internal transaction pricing mechanism, is used to mitigate spam and allocate resources on the network.

Ethereum was proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer. Development was funded by an online crowdsale during July–August 2014. The system went live on 30 July 2015.

In 2016 Ethereum was forked into two blockchains, as a result of the collapse of The DAO project, thereby creating Ethereum Classic.

Milestones

Several prototypes of the Ethereum platform were developed by the Foundation, as part of their Proof-of-Concept series, prior to the official launch of the Frontier network. The last of these prototypes culminated in a public beta pre-release known as "Olympic". The Olympic network provided users with a bug bounty of 25,000 ether for stress testing the limits of the Ethereum blockchain.

After Olympic, the Foundation announced the beginning of the Frontier network to mark the tentative experimental release of the Ethereum platform in July of 2015. Since the initial launch, Ethereum has undergone several planned protocol upgrades called milestones, which are important changes affecting the underlying functionality and/or incentive structures of the platform.

The current milestone is named "Homestead" and is considered stable. It includes improvements to transaction processing, gas pricing, and security. There are at least two other protocol upgrades planned in the future, i.e. Metropolis and Serenity. Metropolis is intended to reduce the complexity of the EVM and provide more flexibility for smart contract developers. The move to Serenity is still uncertain, but should include a fundamental change to Ethereum's consensus algorithm to enable a basic transition from hardware mining (proof-of-work) to virtual mining (proof-of-stake). Improvements to scalability, specifically sharding, are also said to be a key objective on the development roadmap.

What happened so far?

  • The DAO, is a digital decentralized organization which raised successfully more than US$ 150 million by end of May in a crowdsale. You can think of the DAO as a decentralized investment vehicle that “lives” on top of the Ethereum platform.
  • End of June 2016, hackers found and exploited a vulnerability in the DAO code that allowed the attacker to move about 1/3 of the funds to a separate DAO (“dark DAO”).
  • However, due to the nature of the DAO contract the attacker was not immediately able to withdraw the funds. Instead the Ether tokens were locked for 34 days in the dark DAO.
  • After much debate developers, miners and businesses agreed on a hardfork to return the stolen coins to the DAO before the time period would run out.
  • The hardfork was successfully activated on July 20th, leading to a split of the network into “two worlds”: The “ETH” world (about 90% of the total market value and hashrate), and a smaller side of the fork (called “ETC” aka “ethereum classic”).

In the ETH world funds were returned to their rightful owners, while in the ETC world the attacker has won.

So what is the current status?

  • There are two types of coins: ETH (the bigger one), and ETC (the smaller one). Both co-exist at the moment, although this causes some trouble for the use of the platform currently.
  • All exchanges that listed ETH before the fork, continue to support ETH. Furthermore, a few exchanges also added support for ETC.
  • Several projects on the Ethereum platform stated that the contract is only valid on the ETH side (and not on the ETC side).
  • Surprisingly, the market capitalization of ETH + ETC after the fork was bigger than ETH alone before the fork. In some way ETH and ETC seem to serve different client needs.

Where are things going from here?

  • The good news is that the hardfork, although it was executed very quickly, worked without major problems.
  • ETH is the significantly stronger part of the fork and has more backing by the industry.

We are closely watching the situation. Things are getting more stable and the market is responding naturally with minimal upset. At this point in time we are not yet supporting ETC. There are a couple of reasons, why ETC might have problems that need to be resolved first:

  • Several major Ethereum projects such as Digix / Maker only support ETH
  • Significantly more businesses support ETH than ETC
  • The hacker will be able to extract several millions of ETC from the dark-DAO in the next couple of weeks, and can dump them in the market.
  • Potential ongoing fights over funds in the ETC DAO will lead to negative newsflow
  • The hashrate of ETC is much smaller and thus the chain is prone to 51%-like attacks
  • Only a few developers show interest in the ETC codebase