Ethereum, the world’s second most valuable cryptocurrency network after Bitcoin, recently fell victim to a sophisticated hack within one of its third party developer contracts, the DAO, which exposed more than $50,000,000 in user funds to loss — although for now, it appears the money is safely in frozen limbo, with a more concrete solution on the way in the form of a coming software update a majority of miners or nodes need to accept, known as a “hard fork” in cryptocurrency lingo.
The loss is embarrassing, but from a technical perspective, no great harm has been done, in my view. (Full disclosure: I do own some bitcoins and ether at time of publication; ether is the built-in currency or “fuel” of the Ethereum network. Like bitcoin, it is mined on computers all over the world.)
Ethereum is a year old in the marketplace, and has already briefly flirted with a US $1.5 billion market valuation. Despite this crazy vote of confidence from the crypto market, the technology is still new. Bitcoin had many problems in its first couple years that required correction or tweaking.
One time in August 2010, an attacker exploited a vulnerability to issue more than 184 billion bitcoins out of thin air. A fork was needed to heal from the attack.
A slightly less staggering 2,600 BTC were lost in October 2011 due to a malformed address.
Further, at least as a user and crypto enthusiast, this muck up provides interesting insight into the already interesting mind of Ethereum’s wunderkind creator, Vitalik Buterin.
Buterin, one of Bitcoin’s earliest adopters and a cofounder of Bitcoin Magazine, developed Ethereum alongside some of the world’s most skilled cryptographic minds when they realized Bitcoin’s scripting language was simply too restrictive to allow for many kinds of next generation use cases for a blockchain.
And this is where the corporations find Ethereum attractive. Buterin actively shares his development vision via personal reddit and Twitter accounts. “A serious bug in ethereum itself is sufficient to warrant a fork,” he recently posted on reddit. Unlike Bitcoin, whose pseudonymous creator hasn’t been heard from in nearly six years, corporations developing on Ethereum’s blockchain have a sense that any future protocol-level shipwrecks will be righted… as is being done right now with the community’s probable hard fork response to the DAO hack.
Bitcoin is already one of the most incredibly complex breakthroughs in money since the dawn of banking itself, and Ethereum is even more complex both in implementation and eventual market scope, so it is certainly understandable why some are shy to learn about yet another blockchain-based project… can something so complex be good?
To a user who posted about Ethereum possibly being “over-engineered,” or too complex, Buterin popped in to offer his thoughts: “iPhones are incredibly over-engineered below the surface. It often takes a lot of complexity at the bottom and at middle layers in order to make the top look clean and shiny (though ethereum’s philosophy is certainly to favor complexity in the middle over complexity at the bottom wherever possible for consensus/security reasons).”
All this creator-driven handholding is quite alien in mercenary crypto-libertarian land, but it may be exactly what the corporations on the sidelines need to see, especially as the stakes and the use cases for blockchain tech get larger over time.
Already, famed musician Imogen Heap is reportedly using the Ethereum blockchain to handle the payments/online downloads side for her new album; Reebok is reportedly using Ethereum to validate the authenticity of a high-end sneaker line, and it’s no secret in the community that global banking giant UBS is testing Ethereum for use in settling transactions or as an eventual “smart bonds” platform.
Bitcoin isn’t going anywhere: $137.2 million in 24 hour trading volume and a $10.6 billion market capitalization make it the undisputed king of cryptographic assets.
But there’s clearly something about Ethereum…
I don’t think we’ve heard the last from this complex one, or from Vitalik Buterin, Taylor Gerring, & crew.
Especially now that cryptocurrency titan Coinbase accepts Ether, many of Bitcoin’s existing millions of users are likely to read into Ethereum a bit in the months ahead, if not give the tires a kick and take it for a spin.