Ethereum is the second biggest cryptocurrency on the market. Bitcoin is of course the first. Ethereum was founded by Vitalik Buterin who earlier founded Bitcoin Magazine. After years of looking at Bitcoin, Vitalik had a new idea. He released the Ethereum Whitepaper in late 2013, and launched Ethereum in 2014 with Gavin Wood. Ether tokens were distributed in presales designed to get enough funding to get the network up and running. To handle the legal complexities, the Ethereum Foundation was established in Switzerland.
What Is It?
Quoting from the official Ethereum website, “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent ownership of property. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counterparty risk.”
This is a very ambitious undertaking. Basically the Ethereum network is built to be a customizable app and smart contract builder. Bitcoin is fairly easy for me to understand, but I must admit, I don’t really understand Ethereum. The website has a helpful training program to teach would be Ethereum users how to create their own tokens, kickstart a project, create an autonomous democratic organization. The website even claims you can use Ethereum to create your own country.
The DAO Hack
The Ethereum project quickly found itself caught in a large controversy. In June of 2016 the DAO was launched on the Ethereum network as a decentralized venture capital platform that promised to make lawyers and banks obsolete in getting investors for a new project. The DAO was promptly hacked and approximately $60 million dollars was stolen. Many people on the Ethereum development team had lost money and a hardfork was proposed to basically roll back the clock, create a new Ethereum network, and make the stolen ether obsolete.
There were some developers who disagreed with the hard fork approach and after Ethereum forked to create ETH, the old network was maintained as Ethereum Classic (ETC). Interestingly, as of this writing, both networks are viable. As of this writing ETH has a much higher price than ETC. ETH is also the second largest coin just under Bitcoin. Many institutions accept ETH and finding an exchange to buy ETH is easy.
Recently Ethereum is having a problem with CryptoKitties. CryptoKitties is an app that has gone viral to the point where it is clogging up the entire Ethereum network. Ethereum faced a scaling problem and created a solution by building a gas limit to limit the amount of transactions that can happen at one time. Some speculate that the gas limit is reaching its limit. Some people have been waiting 20 hours to clear transactions. My preferred exchange, Gemini, issued a warning about Ethereum processing times. It will be interesting to see how this all plays out.
I wrote this post a few days ago, and just before pushing the publish button, ETH price has been jumping fast. It looks like they may have gotten the CryptoKitties problem solved.
I don’t really understand Ethereum. I’m looking forward to learning more. I’ve put a little bit of money into both ETH and ETC. Cryptocurrencies are so unpredictable and the results are so asymmetric that it pays to put even a little bit into any coin that is viable.
Here’s some websites that helped me to write this post.