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.)
Another Police Official Arrested In Alleged Bitcoin Extortion Plot
Yet another high-ranking police official in the Indian state of Gujurat has been taken into custody in connection with a $1 million bitcoin extortion scheme.
According to the Hindustan Times, Amrel
Bitcoin Price Climbs to 40-Day High Above $9,200
Bitcoin's price climbed above $9,200 on Tuesday to hit a 40-day high, according to data from CoinDesk's Bitcoin Price Index (BPI).
Following a steady increase over the past week, the price of world
Cboe Exchange Wants to Lower Its Bitcoin Futures Prices
The Cboe wants to change the way it prices bitcoin futures contracts, a move that comes just months after the exchange operator first debuted its inaugural cryptocurrency product.
In a newly publis
California Bill Would Legally Recognize Blockchain Stocks
California could become the next U.S. state that allows companies to store data - including information about stockholders - on a blockchain.
Bill 838 was first introduced by Senator Robert Hertzbe
Amber Baldet: Blockchain Alone Isn't A Privacy Cure-All
Blockchain "maximalism" will not solve internet privacy concerns, Amber Baldet said on Monday.
The former JPMorgan blockchain lead made the comments during a talk on the "Internet of Value" and del
$125 Million: Orchid Is Raising One of 2018's Biggest Token Sales
Orchid Labs is raising $125 million in a SAFT sale, filings from the Securities and Exchange Commission (SEC) reveal.
According to a Form D published on April 20, Orchid has raised roughly $36.1 mi
Coinbase-Cryptsy Lawsuit Will Head to Jury Trial
Coinbase has lost another appeal in a lawsuit brought by former customers of the defunct cryptocurrency exchange Cryptsy, and the case will now proceed to a jury trial.
An appeals court in Georgia
Softbank Wants to Cut Carbon Emissions with Green Energy Blockchain
In bid to reduce carbon emissions, a group of Japanese technology and energy firms is launching a pilot project aimed to allow consumers in rural areas to trade renewable energy over a blockchain-base