Here’s why. Ethereum is based on blockchain technology where all transactions are meant to be irreversible and unchangeable. By executing a hard fork and rewriting the rules by which the blockchain executes, Ethereum set a dangerous precedent that goes against the very essence of blockchain. If the blockchain is changed every time a large enough amount of money is involved, or enough people get negatively impacted, the blockchain will lose its main value proposition – secure, anonymous, tamper proof & unchangeable.
As a cryptocurrency attracts more interest, mining becomes harder and the amount of coins received as a reward decreases. For example, when Bitcoin was first created, the reward for successful mining was 50 BTC. Now, the reward stands at 12.5 Bitcoins. This happened because the Bitcoin network is designed so that there can only be a total of 21 mln coins in circulation.
On 29 Novemvber 2017, South Korean Prime Minister Lee Nak-yeon raised concerns that cryptocurrencies were corrupting the youth of South Korea, remarking “There are cases in which young Koreans including students are jumping in to make quick money and virtual currencies are used in illegal activities like drug dealing or multi-level marketing for frauds”.
On 21 November 2017, the Tether cryptocurrency announced they were hacked, losing $31 million in USDT from their primary wallet. The company has 'tagged' the stolen currency, hoping to 'lock' them in the hacker's wallet (making them unspendable). Tether indicates that it is building a new core for its primary wallet in response to the attack in order to prevent the stolen coins from being used.
Physical wallets can also take the form of metal token coins with a private key accessible under a security hologram in a recess struck on the reverse side.:38 The security hologram self-destructs when removed from the token, showing that the private key has been accessed. Originally, these tokens were struck in brass and other base metals, but later used precious metals as bitcoin grew in value and popularity.:80 Coins with stored face value as high as ₿1000 have been struck in gold.:102–104 The British Museum's coin collection includes four specimens from the earliest series:83 of funded bitcoin tokens; one is currently on display in the museum's money gallery. In 2013, a Utahn manufacturer of these tokens was ordered by the Financial Crimes Enforcement Network (FinCEN) to register as a money services business before producing any more funded bitcoin tokens.:80
As with other cryptocurrencies, the validity of each ether is provided by a blockchain, which is a continuously growing list of records, called blocks, which are linked and secured using cryptography. By design, the blockchain is inherently resistant to modification of the data. It is an open, distributed ledger that records transactions between two parties efficiently and in a verifiable and permanent way. Unlike Bitcoin, Ethereum operates using accounts and balances in a manner called state transitions. This does not rely upon unspent transaction outputs (UTXOs). State denotes the current balances of all accounts and extra data. State is not stored on the blockchain, it is stored in a separate Merkle Patricia tree. A cryptocurrency wallet stores the public and private "keys" or "addresses" which can be used to receive or spend ether. These can be generated through BIP 39 style mnemonics for a BIP 32 "HD Wallet". In Ethereum, this is unnecessary as it does not operate in a UTXO scheme. With the private key, it is possible to write in the blockchain, effectively making an ether transaction.
Lightweight clients consult full clients to send and receive transactions without requiring a local copy of the entire blockchain (see simplified payment verification – SPV). This makes lightweight clients much faster to set up and allows them to be used on low-power, low-bandwidth devices such as smartphones. When using a lightweight wallet, however, the user must trust the server to a certain degree, as it can report faulty values back to the user. Lightweight clients follow the longest blockchain and do not ensure it is valid, requiring trust in miners.
There is ongoing research on how to use formal verification to express and prove non-trivial properties. A Microsoft Research report noted that writing solid smart contracts can be extremely difficult in practice, using The DAO hack to illustrate this problem. The report discussed tools that Microsoft had developed for verifying contracts, and noted that a large-scale analysis of published contracts is likely to uncover widespread vulnerabilities. The report also stated that it is possible to verify the equivalence of a Solidity program and the EVM code.
Central to the appeal and function of Bitcoin is the blockchain technology it uses to store an online ledger of all the transactions that have ever been conducted using bitcoins, providing a data structure for this ledger that is exposed to a limited threat from hackers and can be copied across all computers running Bitcoin software. Every new block generated must be verified by the ledgers of each user on the market, making it almost impossible to forge transaction histories. Many experts see this blockchain as having important uses in technologies such as online voting and crowdfunding, and major financial institutions such as JPMorgan Chase see potential in cryptocurrencies to lower transaction costs by making payment processing more efficient. However, because cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist, or if somebody simply loses their private keys.
Transactions are defined using a Forth-like scripting language.:ch. 5 Transactions consist of one or more inputs and one or more outputs. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain. The use of multiple inputs corresponds to the use of multiple coins in a cash transaction. Since transactions can have multiple outputs, users can send bitcoins to multiple recipients in one transaction. As in a cash transaction, the sum of inputs (coins used to pay) can exceed the intended sum of payments. In such a case, an additional output is used, returning the change back to the payer. Any input satoshis not accounted for in the transaction outputs become the transaction fee.
Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely. However, plenty of research has been undertaken to identify the fundamental price drivers of cryptocurrencies. Bitcoin has indeed experienced some rapid surges and collapses in value, reaching as high as $19,000 per bitcoin in December of 2017 before returning to around $7,000 in the following months. Cryptocurrencies are thus considered by some economists to be a short-lived fad or speculative bubble. There is concern especially that the currency units, such as bitcoins, are not rooted in any material goods. Some research has identified that the cost of producing a bitcoin, which takes an increasingly large amount of energy, is directly related to its market price.
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Vitalik Buterin picked the name Ethereum after browsing Wikipedia articles about elements and science fiction, when he found the name, noting, "I immediately realized that I liked it better than all of the other alternatives that I had seen; I suppose it was the fact that sounded nice and it had the word 'ether', referring to the hypothetical invisible medium that permeates the universe and allows light to travel."
Many people believe that cryptocurrencies are the hottest investment opportunity currently available. Indeed, there are many stories of people becoming millionaires through their Bitcoin investments. Bitcoin is the most recognizable digital currency to date, and just last year one BTC was valued at $800. In November 2017, the price of one Bitcoin exceeded $7,000.
Physical wallets store the credentials necessary to spend bitcoins offline and can be as simple as a paper printout of the private key::ch. 10 a paper wallet. A paper wallet is created with a keypair generated on a computer with no internet connection; the private key is written or printed onto the paper[h] and then erased from the computer. The paper wallet can then be stored in a safe physical location for later retrieval. Bitcoins stored using a paper wallet are said to be in cold storage.:39 In a 2014 interview, QuadrigaCX founder Gerald Cotten explained that the company stored customer funds on paper wallets in safe deposit boxes: "So we just send money to them, we don’t need to go back to the bank every time we want to put money into it. We just send money from our Bitcoin app directly to those paper wallets, and keep it safe that way."
The market of cryptocurrencies is fast and wild. Nearly every day new cryptocurrencies emerge, old die, early adopters get wealthy and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world around. Few survive the first months, and most are pumped and dumped by speculators and live on as zombie coins until the last bagholder loses hope ever to see a return on his investment.
Transactions that occur through the use and exchange of these altcoins are independent from formal banking systems, and therefore can make tax evasion simpler for individuals. Since charting taxable income is based upon what a recipient reports to the revenue service, it becomes extremely difficult to account for transactions made using existing cryptocurrencies, a mode of exchange that is complex and difficult to track.
Ethereum enables developers to build and deploy decentralized applications. A decentralized application or Dapp serve some particular purpose to its users. Bitcoin, for example, is a Dapp that provides its users with a peer to peer electronic cash system that enables online Bitcoin payments. Because decentralized applications are made up of code that runs on a blockchain network, they are not controlled by any individual or central entity.
#BitBlockBoom was probably the most surreal event to occur in crypto land since the Bitconnect annual ceremony of January 2018. The event, which is a self-described conference for Bitcoin Maximalists, saw a presentation which gave a step-by-step guide to trolling and arguing with supporters of other cryptocurrencies. One slide, titled “The path to victory” closed with the statement “bully people that don’t agree with us”; and another titled “Relentless propaganda again” led with “Nocoiners must be crushed” (here’s a full transcript of the ramblings).
Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. To achieve independent verification of the chain of ownership each network node stores its own copy of the blockchain. About every 10 minutes, a new group of accepted transactions, called a block, is created, added to the blockchain, and quickly published to all nodes, without requiring central oversight. This allows bitcoin software to determine when a particular bitcoin was spent, which is needed to prevent double-spending. A conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, but the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.:ch. 5