The new kid on the Block: Ethereum

By Amruth Chinnappa

The trade of cryptocurrency using decentralized blockchain technology has introduced an aspect of trust, freedom and security elusive in its traditional counterparts. The tamper-proof and convenient features have led to its escalating use with 9 billion dollars transferred in bitcoins in 2016, which is excluding the two hundred other cryptocurrencies in circulation. Ethereum is one of the new players in the market, and it offers fantastic attributes beyond those of traditional commodities like the bitcoin.

The technology behind it

Similar to the Bitcoin, it is reliant on the blockchain technology to serve as a method of currency transfer between users and gets rid of the need for a centralised entity to take charge of the transaction. Called ether, the units can be used to pay the transaction fee and services provided by Ethereum, and are held in Ethereum wallets. The transactions are centred around a protocol named Smart Contract, a program which lays down the procedure and framework involved in the contract to be executed automatically when certain conditions are met.

The brainchild of Vitalik Buterin, the genesis of Ethereum fulfilled the need for a system like Bitcoin, but with more uses of the possibilities empowered by Blockchain technologies. The core innovation exhibited by it is called the Ethereum Virtual Machine (EVM), which uses a Turing complete software running on the Ethereum network. It enables anyone to run any program and in any language, the sole criteria being the availability of time and memory. It also enables the development of thousands of different applications on the same platform. Such Decentralized Autonomous Organisations (DAO) can be used in multiple industries where users can contact each other, take decisions and act together. Tokens are purchased by the members who hold a stake in the venture and these are used as a measure of voting rights in their collective decisions.

The downsides and the loopholes

Mining for Ether is a time-consuming process, which involves solving complex mathematical questions to generate a proof of work and thus obtain the currency. The entire technology revolves around connections through peer maintained networks and works with a public view of transaction details, making it extremely transparent. All such transactions are sent through the network for verification by the members. These lists of transactions are updated every ten minutes for Bitcoins, and twelve seconds in case of Ethereum, owing to its Greedy Heaviest Observed Subtree (GHOST) protocol. So, although the waiting time is much lesser for Ethereum, it ends up generating orphan processes in the program.

To maintain the integrity of the currency, the total number of others to be mined is limited to 21 million BTC, with the present value of bitcoins being $3909.19 and two-thirds of it mined already. Ethereum has shown a considerable rise in value and costs $283.42 in its initial stage. But the security and immutability of the blockchain platform are not carved in stone, as instances of hacking of an organisation named the DAO resulting in the loss of 50 million dollars take place. The recovery of the money would entitle a change in the framework of the structure, going against its principle of immutability. This has led to the division of the community into those who believe in recovering the money by restructuring (in case of any fraud), and those who intend no change. The communities are termed as Ethereum and Classic Ethereum respectively.

The Blockchain technology has been likened to the second coming of the internet and promises to change the dynamics of business forever. A lot of exciting changes are afoot in the cyberspace, and Ethereum definitely promises to be a leader with new methodologies in the field. 

Featured Image Source: Pixabay