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Category – Blockchain

Quo Vadis Ethereum?

Since our last blog post about Ethereum a lot has changed. Every person who participates in the cryptoworld is used to a certain level of craziness. However, the ongoing events in the Ethereum world blew us beyond “normal” craziness. You might already have heard about decentralized organization (“the DAO”), hardfork, the dark DAO and white hackers. If you haven’t, don’t worry and buckle up…

What happened so far?

  • The DAO, is a digital decentralized organization which raised successfully more than US$ 150 million by end of May in a crowdsale. You can think of the DAO as a decentralized investment vehicle that “lives” on top of the Ethereum platform.
  • End of June 2016, hackers found and exploited a vulnerability in the DAO code that allowed the attacker to move about 1/3 of the funds to a separate DAO (“dark DAO”).
  • However, due to the nature of the DAO contract the attacker was not immediately able to withdraw the funds. Instead the Ether tokens were locked for 34 days in the dark DAO.
  • After much debate developers, miners and businesses agreed on a hardfork to return the stolen coins to the DAO before the time period would run out.
  • The hardfork was successfully activated on July 20th, leading to a split of the network into “two worlds”: The “ETH” world (about 90% of the total market value and hashrate), and a smaller side of the fork (called “ETC” aka “ethereum classic”).

In the ETH world funds were returned to their rightful owners, while in the ETC world the attacker has won.

So what is the current status?

  • There are two types of coins: ETH (the bigger one), and ETC (the smaller one). Both co-exist at the moment, although this causes some trouble for the use of the platform currently.
  • All exchanges that listed ETH before the fork, continue to support ETH. Furthermore, a few exchanges also added support for ETC.
  • Several projects on the Ethereum platform stated that the contract is only valid on the ETH side (and not on the ETC side).
  • Surprisingly, the market capitalization of ETH + ETC after the fork was bigger than ETH alone before the fork. In some way ETH and ETC seem to serve different client needs.

Where are things going from here?

  • The good news is that the hardfork, although it was executed very quickly, worked without major problems.
  • ETH is the significantly stronger part of the fork and has more backing by the industry.

We are closely watching the situation. Things are getting more stable and the market is responding naturally with minimal upset. At this point in time we are not yet supporting ETC. There are a couple of reasons, why ETC might have problems that need to be resolved first:

  • Significantly more businesses support ETH than ETC
  • The hacker will be able to extract several millions of ETC from the dark-DAO in the next couple of weeks, and can dump them in the market.
  • The hashrate of ETC is much smaller and thus the chain is prone to 51%-like attacks
  • Only a few developers show interest in the ETC codebase

The dust will likely settle in the next couple of weeks and the media focus will return to the strength of the platform again. A lot of development effort is going into the Ethereum platform and many more great dapps. Despite the fork, which caused some annoyances, we see great value in Ethereum as a platform in the near, and long term. As always, we’ll keep you informed about any other changes or news that might be helpful.

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