Before Bitcoin was invented, the only way to use money digitally was through an intermediary like a bank, or Paypal. Even then, the money used was still a government issued and controlled currency. However, Bitcoin changed all that by creating a decentralized form of currency that individuals could trade directly without the need for an intermediary.
Each Bitcoin transaction is validated and confirmed by the entire Bitcoin network. There’s no single point of failure so the system is virtually impossible to shut down, manipulate or control. Pretty neat huh? Well, now that we know that money can be decentralized, what other functions of society that are centralized today would be better served on a decentralized system? What about decentralized voting?
Voting requires a central authority to count and validate votes.
Real estate transfer records currently use centralized property registration authorities. Social networks like Facebook are based on centralized servers that control all of the data we upload to them.
What if we could use the technology behind Bitcoin, more commonly known as Blockchain, to decentralize other things as well? The interesting thing about Blockchain technology is that it’s actually the by-product of the Bitcoin invention.
Blockchain technology was created by fusing already existing technologies like cryptography, proof of work and decentralized network architecture together in order to create a system that can reach decisions without a central authority.
There was no such thing as “blockchain technology” before Bitcoin was invented. But once Bitcoin became a reality, people started noticing how and why it works and named this “thing” blockchain technology.
People can “rent” hard drive space directly to other people and make Dropbox obsolete. Drivers can offer their services directly to passengers and remove “Uber” as the middleman.
It’s a network of computers that together combine into one powerful, decentralized supercomputer.
Ok, So now you know what Ethereum does but we haven’t touched upon HOW it does it. Ethereum’s coding language, Solidity, is used to write “Smart Contracts” that are the logic that runs Dapps.
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The process uses this information as well as VDF to randomly select a time elector, and only one can get chosen at a time.
Time electors also run a VDF to determine if they have been chosen to add a new block to the Timechain. If they have been selected, they validate the block, generate a VDF proof and submit both of the data to the rest of the nodes in the Timechain.
During the second stage, the block and VDF proof is sent to 1,000 other time electors to be double-checked before being added to the Timechain.
If most of the time electors agree to accept the transaction it is added to the Timechain.
How the two consensus protocols compare
PoS and PoT share a few similarities. Firstly they both require validators to stake tokens as collateral when verifying transactions, with a higher stake increasing the chances of being selected.
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For a developer like Andre, this would have been trivial. And there was nothing anyone could do about it.
Andre did not take this path.
It’s unlikely it ever even crossed his mind. And in the hours after it became clear that the community had jitters about his ownership, Andre swiftly implemented a multi-signature wallet and handed it to the community. Andre chose not to be a signatory.
So why should we care? Well, ignoring Andre’s own moral code for a second, his ownership of the keys to those funds would make him a target for criminals. Ransoms and “five dollar wrench” attacks are a real threat to public figures with large holdings.
But that’s not the only reason.
For a brief moment in Ethereum, the vast majority of users interacting with YFI unknowingly handed over unimaginable power to a single person.
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This is done so that people will write optimized and efficient code and won’t waste the Ethereum network computing power on unnecessary tasks.
Ether was first distributed in Ethereum’s original Initial Coin Offering back in 2014. Back then it cost around 40 cents to buy one Ether. Today, one Ether is valued in hundreds of dollars since the use of the Ethereum network has grown immensely due to the ICO hype that started in 2017.
Still Confused? Don’t worry; we’ll get more into Ether and mining in a later video.
Ethereum’s network and Ether are a whole new rabbit hole that we’ll cover but I think this will do for now as an intro to Ethereum. This concludes this week’s episode of Ethereum Whiteboard Tuesday.
It added that the compromised wallets held a small portion of its assets and that its other wallets are “secure and unharmed.”
In its statement, BitMart added that it has temporarily suspended all withdrawals until further notice. It also said it was conducting a thorough security review of the incident.
Security Experts Say Bitmart Hackers Will Be Hard to Trace
In its statement, BitMart said it was “still concluding” how the hackers breached its hot wallets.
However, after the breach, the hackers used a technique to make the funds harder to trace, despite being on a public blockchain.
You’d need to understand how Bitcoin’s decentralization works, write code that mimics the same behaviour, get a huge network of computers to run this code and so on…. And that is a lot of work. Enter Ethereum and Ethereum token.
Ethereum was first proposed in late 2013 and then brought to life in 2014 by Vitalik Buterin who at the time was the co-founder of Bitcoin Magazine.
Ethereum is the Do It Yourself platform for decentralized programs also known as Dapps – decentralized apps. If you want to create a decentralized program that no single person controls, not even you even though you wrote it, all you have to do is learn the Ethereum programming language called Solidity and begin coding.
The Ethereum platform has thousands of independent computers running it meaning it’s fully decentralized.
This isn’t very different than a creative lawyer figuring out a loophole in the current law to effect a positive result for his client.
What happened next is that the Ethereum community decided that code no longer is law and changed the Ethereum rules in order to revert all the money that went into the DAO. In other words, the contract writers and investors did something stupid and the Ethereum developers decided to bail them out.
The small minority that didn’t agree with this move stuck to the original Ethereum Blockchain before its protocol was altered and that’s how Ethereum Classic was born, which is actually the original Ethereum.
We’ve covered a lot up until now and the last thing I want to talk about is Ethereum as a currency.
Forsage, which claimed to be a decentralized smart contract platform allowing investors to enter into transactions via smart contracts that operated on the Ethereum (ETH), Tron (TRX), and BNB Smart Chain blockchains.
According to the SEC, Forsage functioned like a standard pyramid scheme for more than two years, allowing investors to earn profits by bringing others into the operation.
In its formal complaint, the SEC also said that the company was a “textbook pyramid and Ponzi scheme,” which did not sell “any actual, consumable product,” and that “the primary way for investors to make money from Forsage was to recruit others into the scheme.”
“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit, said.
Once a smart contract is deployed on the Ethereum network, it cannot be edited or corrected, even by its original author. It’s immutable. The only way to change this contract would be to convince the entire Ethereum network that a change should be made and that’s virtually impossible.
This creates a very serious problem since unlike Bitcoin, Ethereum was built with the ability to create really complex contracts, and complex contracts are very difficult to secure.
With any contract, the more complicated it is, the harder it is to enforce as more room is left for interpretations, or more clauses must be written to deal with contingencies.
With smart contracts, security means handling with perfect accuracy every possible way in which a contract could be executed in order to make sure that the contract does only what the author intended.
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