Cryptocurrency: Ethereum

Ethereum was created by programmer Vitalik Buterin, after being inspired by the possibilities of Bitcoin’s concept of a decentralised blockchain system.
While Satoshi Nakamoto’s inspiration for creating Bitcoin was to cut out third-party financial institutions and banks in currency trading, Buterin wanted to test the blockchain concept with a much wider application.

Ethereum is the platform where users can build, share and use their own Dapps (decentralised applications), which are programs capable of being shared within the Ethereum blockchain network.
Or simply, developers can use Ethereum’s blockchain network to send code from one device to another, which can be used to operate programs.

When these Dapps are employed to the network, the same blockchain system of verification is triggered, and miners operating from thousands of nodes will update the block to the chain.
This same blockchain concept as Bitcoin trading gives Ethereum the capability of providing a decentralised platform where users can interact and perform almost any task without reliance of a third party.
This internet-based direct mode of communication and information sharing can allow users to perform any digital task without relying on the help of third parties, potentially making brands like Amazon, Facebook and DropBox redundant.

This is where the cryptocurrency comes in when using Ethereum.

Ether is the currency traded in return for the transferred information and resulting access to Dapps.

The currency is also required by coders uploading to the network’s blockchain as a means of quality control and optimising Ethereum’s computing power.
Ether also works much in the same way as Bitcoin in that miners verify transactions and are rewarded with cryptocurrency.

Because these programs on the Ethereum network are publicly accessible, anyone can use ether to gain access if they meet the demands of the attached smart contracts smart contractsDictates the terms in which information can be sent and received between parties on a blockchain network. Differs from a regular contract in that it is written in code and stored on a blockchain, so both parties have access and its terms remain permanent..

This concept of the smart contract was thought to be water-tight by its creators, however it failed to consider the difficulty in securing an agreement with growing complexity.
As a smart contract becomes more complicated, so do the potential scenarios of execution.
Hackers were able to manipulate these factors of a particular smart contract attached to a DAO (decentralised autonomous organisation), which was programmed to make investments automatically using funds deposited by investors.

The DAO had made around $US150 million in Ether when a hacker took advantage of the loopholes found in its complex smart contract, draining the entirety of the DAO’s funds.

Ethereum developers broke their own strict fundamental concept on smart contracts by bailing out the DAO and adjusting the system to reinstate the funds, which led to a revolt of sorts from Ethereum users.
With this change in protocol came a new blockchain, which today is known as Ethereum Classic Ethereum ClassicThe original Ethereum blockchain, renamed following the original cryptocurrency’s hard fork..
The users who didn’t agree with Ethereum’s change in protocol continue to use the original blockchain, still called Ethereum.

This divergence of the Ethereum blockchain is perhaps one of the more renowned examples of what is known as a fork.

Forks are an important factor in the cryptocurrency world, as the rate of growth, innovation and change sees a constant readjustment and introduction of new types of cryptocurrencies.
An event like Ethereum’s fork will often produce a new breakaway cryptocurrency.
The new cryptocurrency interacts with a version of the same blockchain, just running side-by-side under new procedure protocols.

The DAO event and the subsequent arrival of Ethereum and Ethereum Classic is what is known as a hard fork event.
Hard forks are usually unplanned and extreme events of protocol change warranting the introduction of a new cryptocurrency.
Ethereum experienced more hard fork disruptions after the DAO, which saw the arrival of EtherZero EtherZeroAn Ethereum hard fork cryptocurrency creation focused on trying to provide faster and cheaper transactions than its predecessor. and Metropolis MetropolisMetropolis is a hard fork of the Ethereum blockchain executed by an adjustment in blockchain protocol in an attempt to make the platform more scalable and secure..

There are also soft forks, which are more subtle versions of hard forks allowing changes to a system while still being compatible with the original blockchain.