2009 saw the introduction and first practical implementation of a proper digital currency in the form of Bitcoin. It was the first of its kind. This form of currency relied on using cryptography to generate and verify the transactions of the formed currency. All the transactions get logged onto the ledger called the Blockchain network. Bitcoin turned out to be a revolutionary form of currency that was basically a decentralized peer-to-peer payment system that was not under the regulation of any central authority.
The rising popularity of Bitcoin and the innovative idea behind it led to the creation of more cryptocurrencies. Even though Bitcoin is still the biggest and most successful cryptocurrency, another entered onto the stage in the crypto-ecosystem: Ethereum.
Although quite similar to Bitcoin, Ethereum has some fundamental differences that render Bitcoin arguably archaic. Ethereum is not just a currency. It is a whole infrastructure that uses Ether as its currency and supports smart contracts, agreements written in computer code that come into play automatically upon completion of conditions.
Ethereum gained significant traction even though it was new on the scene, but its biggest turning point came with the experimentation of Distributed Autonomous Organization (DAO). A German blockchain start-up company came up with DAO with a radical goal of building an autonomous venture capital firm which would essentially allow all the investors to make decisions using only the facility of smart contracts. All the involvement that humans would have with DAO would be with the coding of the rules, but after that, the execution would lie completely within the realm of the pre-defined computer protocols.
Paramount success followed, with it having amassed roughly $150 million USD within a month of its launch on the 30th of April this year. This became the biggest singular crowdfunding effort in history and it became the most important achievement for Ethereum, the basis on which DAO was working on.
But with all good things, it had to come to an end. DAO was hacked on the 17th of June. In what can only be described as being reminiscent of watching a live video feed of a bank robbery, everyone was witnessing the real-time siphoning of the $150 million USD that was under the domain of DAO. By the end of this robbery in broad daylight, the hacker responsible was able to steal an amount of around $50 million USD in ether stating he was only taking advantage of some loophole that existed in the Distributed Autonomous Organization.
This put the core team of Ethereum in a moral dilemma. They didn’t have anything to do with DAO but they were left to deal with the problem. This would mean they would have to get involved as a central authority, the lack of which is the main basis of cryptocurrencies. They hacked the hacker and managed to recover the funds and place them into another smart contract. The problem was that with the way DAO was written, it was still possible for the hacker to make a claim on the funds he stole. With Buterin and Co. stepping in to fix the problem, heated debates sparked between those who think the funds should be returned and the purists who think that the power of smart contracts lies in their unchangeable nature. Henceforth the intervention was called the ‘fork’.
Initially the fork proposed was to allow all Ethereum users to vote and rollback the entire network to a previous day where DAO never existed and all the money would be reimbursed. Problems were found in the voting system which caused this proposal to fail and the core team resorted to using a ‘hard fork’ which was basically them revamping the whole Ethereum network with changed rules. Miners, investors, exchanges and other major apps built in the system would then decide if they want to stay on-board with Ethereum based on these new rules or stick with the older version.
Fears of the Ethereum price dropping were hanging over the heads of everyone invested into the blockchain network but things have worked out since then and the future of Ethereum looks more secure.