The Ethereum ecosystem includes many different moving parts due to its use as a platform for other applications as well as the many areas of development that are pursued for the network.
The base layers of the Ethereum protocol and the code it can support on the blockchain enable smart contracts and dApps. This means that developers can create applications that replace all types of financial or legal transactions, as well as more general applications such as: B. those that can transform entire industries or games to collect and trade digital cat collectibles.
The possibilities are not endless as there are some types of applications that are not suitable for decentralization, such as those that require a lot of serial computations (e.g. cloud computing). However, there are many applications that can be effectively decentralized and provide benefits to users.
ICOs
Not only did Ethereum allow developers to create applications for this new decentralized internet, but it took it a step further in 2015 by introducing a standard for creating tokens in Ethereum, which allows developers or any other company to raise money. These token offerings have become known as Initial Coin Offerings (ICOs) and have become a very popular means of raising funds.
But as with all new tech or business fundraising opportunities, not all ICOs are created equal and there have been multiple ICOs that have been nothing more than a scam or get-rich-quick scheme. The Ethereum community has generally left it up to individual investors to determine the merits of a particular ICO.
Although there are some in the Ethereum community who believe that ICOs are the future, there is an impact on regular ETH usage as they increase the load on the network and cause longer transaction times and higher fees. So some in the community are hoping the market will mature to understand that token offerings only make sense for applications that can leverage Ethereum’s decentralized platform.
Although ICOs can be a utility that Ethereum can offer and raised $ 3.7 billion in 2017 and many ICOs are slated for 2018, it is important to watch how successful they are and how heavy their network usage will be as the progress in Towards scalability.
Attacks on Ethereum Applications
In addition to using Ethereum to fund questionable token sales, there have also been several high profile attacks on Ethereum applications and clients. The most important attack in the history of Ethereum so far is known as the “DAO attack”.
DAO stands for Decentralized Autonomous Organization and is a smart contract that encodes all the rules of a company or organization that are regulated exclusively by the code in this smart contract without human intervention.
“The DAO”, a special implementation of a DAO, collected the equivalent of 150 million US dollars in ETH through a token offer in May 2016 and ultimately held up to 16% of all ETH existing at the time. But due to a simple coding bug, the DAO was attacked by a malicious user who was able to siphon off $ 50 million of ETH into a child’s account.
The bug was in the smart contract code for “The DAO”, not Ethereum, but the fact that such a simple bug could have such dire consequences called into question the overall safety / effectiveness of Solidity, the Ethereum coding language. As the investigation continued, it became clear that the community was facing a critical decision point:
- Do what appears to be the “right thing” and take back ETH from the attacker in order to make the DAO investors whole again by performing a hard fork (creating a new version of Ethereum that would not be backwards compatible).
- Stay true to one of the guiding principles in crypto and don’t change history; Let the attacker keep the funds and leave the incident to investors in future smart contracts as a warning that the code underlying the smart contract needs to be examined more carefully
After a lively debate and vote in the community, the choice fell on returning the funds to DAO investors through a hard fork that took place on July 20, 2016. The new chain created by the fork was widely adopted, but there were still some who some endorsed the original chain and what came to be known as the Ethereum Classic was born, but that’s a story in itself.
Weak points and bugs
The other very interesting incident that shapes the history of Ethereum happened more recently in November 2017. Another coding error, this time in Parity, one of the privately developed Ethereum clients (the interface for interacting with the Ethereum network), made possible allowing a user to take action that resulted in over 500,000 ethers (valued at about $ 150 million at the time) being trapped.
After a similar vulnerability was exploited in July 2017 in which a malicious user stole 150,000 ETH (worth about $ 30 million at the time), a patch was created, but unfortunately a seemingly inexperienced user researching this July exploit removed, ” accidentally “parity the library code, which makes the entire ETH in this library completely inaccessible.
Some of the interactions with the user who caused this problem led to the assumption that they were unaware of the consequences of their actions. This again questions how easily a coding mistake can have a major impact on the Ethereum community. The ETH lost in this incident are still inaccessible and at this point the only solution to getting the funds back seems to be another hard fork and another reversal of history.
Conclusion: Strength of the coin ecosystem / blockchain
How the Ethereum community deals with the restoration or non-restoration of the affected Parity users will shed light on how much influence different parts of the community have on Ethereum development.
So far, the main players in Ethereum seem to be resisting the temptation to standardize a means of recovering lost or stolen funds, taking the position that cases like the DAO are the exceptional circumstances that call for extreme action.
The Ethereum blockchain itself has not been successfully attacked, but with so many other applications sitting on top of Ethereum, the security of each dApps can also significantly affect the value of the platform itself. Ethereum faces a slippery slope in either direction if such poorly designed applications are exploited. If a solution or mechanism is defined to determine when / how to deal with these exploits, it would give ETH owners more reassurance as to the value of the platform.
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