Ever heard of Ethereum? It's Bitcoin's experimental younger
brother, and its community has just been shaken by
a massive hack that stole more than $50 million from one of the
biggest organisations in the community, The DAO. Here's what
you need to know.
Ethereum differs from bitcoin in that it can run smart contracts — contracts that execute themselves entirely autonomously when certain conditions are met. An auction might automatically transfer deeds of ownership to the highest bidder after a certain time has elapsed, or father's contract might automatically send his son a set amount of money every year on his birthday.
Ultimately, the decision will be taken by the community. The merits of both options will be debated, and if consensus cannot be reached, then the community may take the nuclear option — and split.
It's a decentralised cryptocurrency.
Unlike some previous attacks on digital currency organisations, the attacker has been unable to make a swift getaway and launder their ill-gotten goods to evade being tracked. This is because the exploit moved the funds into a "child" DAO, where they can't be moved for 27 days, according to Ethereum founder Vitalik Buterin.
In plain English, that means it's a digital currency that doesn't have any single central bank. Instead, its users collectively contribute computing power towards maintaining the network — like Bitcoin.
Meanwhile, the developer community is looking for ways to recover the Ether. Buterin and other developers have proposed a solution that will create a "soft fork" that prevents the attacker from being able to make valid transactions with the stolen Ether, followed by a "hard fork" that recovers the Ether and returns it.
While it's not on the same scale as Bitcoin, it's still pretty huge. It has ballooned in value over the last year, with a market cap of $1.4 billion, and one Ether (or ETH, a unit of the digital currency) is currently worth $16.76.
It's all about the wisdom of the crowd. David Cannon/Getty Images
Move over Marc, there is a new generation of investors. Michael Kovac/Getty Images for Vanity Fair
Collectively, they will decide how to allocate this capital, like a next-generation Kickstarter, or a crowd-sourced venture capital firm.
An attacker — we don't yet know who — took advantage of this vulnerability to attack the DAO's holdings early Friday morning, with devastating consequences.
"The contract is law according to The DAO's terms of service, [the attacker] didn't break the rules of that, he used his prescribed access to take the funds he was allowed," argued another.
There may be a fork in the road ahead for Ethereum. i_yudai/Flickr (CC)
The total value of the Ether taken, depending on whether you value it by the pre-hack highs or the mid-hack lows, varies between $50 million and $79 million.
There is actually significant opposition to the proposal to fork Ethereum to tackle the issue. It's DAO's fault, dissidents argue, and adjusting the code in response to this incident betrays the sanctity of the blockchain. "The attacker just used the code as it is written," said one community members of DAO's chat channel on Slack. "The people who wrote/audited the code need to be held accountable."
DAO stands for Decentralised Autonomous Organisation, something anyone can build on top of Ethereum's platforms. They're organisations that operate according to predefined rules, and don't have a board of directors or leadership in the traditional sense.
In such an occasion, only one version would ultimately survive — but it could damage the digital currency's credibility in the process.
They managed to drain 3.6 million ether from the organisation, while the community went into meltdown. The price of the digital currency plummeted, from record highs of $21.50 to just $14, before recovering somewhat.
Because Ethereum is decentralised, these changes can't be pushed through voluntarily: They have to be accepted by the network of users running Ethereum's software to take effect. In a soft fork, users running different versions are able to communicate and transact — but following a hard fork, the two versions are total incompatible. This means any decision to hard fork is a serious matter, and is debated heavily.
A $50-million-plus digital heist. Sion Touhig/Getty Images
A vulnerability was discovered earlier this month that lets an attacker, in some circumstances, drain the contents of smart contract wallets storing Ether.
In this context, we're talking about The DAO — a hugely successful organisation that manages its investors' capital. It has had huge amounts of money pumped into it by 11,000 people in the Ethereum community — more than $150 million. (Its funding was arguably the largest crowdfunding campaign ever.)
Ripple Price Technical Analysis – XRP/USD Eyes Further Gains
Ripple price is placed well in the bullish zone against the US Dollar and Bitcoin. XRP/USD might soon retest $0.2600 and it could even break it. There were slow and steady gains in Ripple price
DASH/USD and LTC/USD Technical Analysis November 23 2017
Hello and welcome to News BTCâs Market OutlookÂ November. DASH/USD DASH continues to power ahead, touching $575 during the trading session on Wednesday. I suspect that we will probably get a
FLUX Gaming – Game Developers and Players Now Own the Game
All game developers want to produce a blockbuster. But as the gaming world knows all too well, the business of creating blockbusters is risky. Players may move in a flash to another game for more
DASH AND MONERO RALLY WHILE IOTA IS PEAKING NOVEMBER 23 TECHNICAL ANALYSIS
As perfect BTC alternatives, DASH and Monero are rallying perhaps benefiting from capital injection. Alt coin Monero is actually trending above August highs of $153. If bulls push harder, buyers
BTC/USD and BTC/JPY Technical Analysis November 23 2017
Hello and welcome to News BTCâs Market OutlookÂ November. BTC/USD Bitcoin fell slightly against the US dollar after initially trying to rally on Wednesday in what could probably be best
Ethereum Price Technical Analysis – ETH/USD Remains Buy on Dips
Ethereum price is gaining momentum against the US Dollar and Bitcoin. ETH/USD is now well above $368 and is eyeing more upsides. There were continuing gains in ETH price above the $350 level
Bitcoin Price Technical Analysis for 11/23/2017 – Bearish Divergence Alert!
Bitcoin Price Key Highlights Bitcoin price is slowing on its climb, possibly priming for a pullback on profit-taking over the Thanksgiving break. Technical Indicators Signals The 100 SMA is
Bitcoin Cash Price Technical Analysis – BCH/USD to Retest $1500
Bitcoin cash price gained bullish momentum recently above $1200 against the US Dollar. BCH/USD might continue to move higher towards $1500. There was a solid upside move in bitcoin cash price as