Ethereum is an open source public software platform designed to support smart contract functionality. The network uses Ether ( ETH ) as the currency to process transactions and provide computing power to developers. The network also allows developers to build decentralized smart contract applications on top. For example, Tether and Augur operate on the Ethereum network .
The concept of a smart contract is essential to understanding Ethereum ( ETH ) compared to Ethereum Classic ( ETC)). Simply put, a smart contract is an agreement between two parties written in code. It defines the conditions that each party must fulfill for the contract to be executed. Once the conditions are met, the contract is processed by the blockchain and executed without the need for verification by a third party. Coupled with the immutability of the blockchain and its open source design, smart contracts represent an opportunity for many companies. In fact, in 2019 Forbes identified more than 100 large U.S. companies actively exploring blockchain technology, many of which use the Ethereum network .
Ethereum Classic ( ETC ) is the original blockchain of Ethereum . ETH and ETC share the same blockchain record before the hard fork of July 2016. For this reason, the initial design and functionality of these two networks were essentially the same. The hard fork in 2016 divided the blockchain into Ethereum Classic and Ethereum , dividing the community at the time. Most developers have chosen to switch to the new Ethereum protocol , limiting the size of the ETC community and its ability to improve the network.
A brief history of the Ethereum network
Ethereum was first described by Vitalik Buterin in late 2013. He argued that Bitcoin ( BTC ) needed a different programming language to automate task execution, in order to allow developers to build applications at above his blockchain. The idea did not receive enough support in the Bitcoin community , which led to the creation of Ethereum in 2014. The first development efforts were funded by a crowdfunding in July 2014. It raised more than 25,000 BTC , making it the largest crypto increase ever made at the time. After the crowdsale, Ethereum had a market capitalization of just over $ 17 million, up from nearly $ 22 billion today.
Decentralized autonomous organization (DAO) and ETH vs ETC separation
The DAO was to be a decentralized community funding platform. The community would fund the development of blockchain applications and receive a share of the profits if an application succeeds. It was built on the Ethereum blockchain and operated on the basis of a set of smart contracts. Imagine a venture capital company where private equity was outsourced and no management decided which projects would be funded. The CAD has enabled token holders to make investment decisions, by distributing funds to projects that havereceived more than 20% of community support. It was launched in April 2016 and was funded by one of the largest crowdfunding campaigns, raising nearly $ 150 million in Ether. At its peak, the DAO attracted 14 percent of the ether in circulation.
There were several security breaches with the DAO code which were reported several times in May and June 2016. The project promoters had to buy DAO tokens with Ether. To allow investors to withdraw their support for a project they did not wish to support, a "Split Function" was created. The function allowed an investor to leave the CAD by receiving his investment in Ether or to train his version of the CAD, called "DAO child". Once the splitting function is launched, the holder would receive their Ether and the network would update the general ledger. The holder should then hold ether for 28 days without being able to use it.
The function of splitting in combination with other vulnerabilities has been exploited 17 June 2016. or hackers have stolen 11.5 million Ether, worth about $ 50 million at the time , by repeatedly triggering the split function. The network continued to reimburse Ether for the same DAO tokens without recording the transaction in the general ledger. However, the stolen Ether was still subject to the 28-day detention period. Ether being technically recoverable, the Ethereum community could either create a fork to reverse illegitimate transactions, or do nothing.
This die fighting has divided the community along ideological lines. The main argument for doing nothing was that the blockchain was supposed to be immutable and free from manipulation by any individual or group. This was the key aspect of decentralized applications. Forking the blockchain to reverse the hack would create moral hazard, potentially leading to future hard forks based on unknown motivations.
A vote was called on July 15, 2016, where 87% of the community voted for the hard fork. However, more than 82 million existing Ether chips, only 5.5% have voted. The new blockchain, Ethereum Classic, has changed the history of the original blockchain to reverse the CAD hack. The first Ethereum Classic block was mined on July 20, 2016, preserving the record unchanged.