Alternatives to Bitcoin
The course is part of this learning path
The most well-known cryptocurrency is BitCoin, but in this course, we will introduce you to some other alternatives out there in the cryptocurrency ecosystem. These include Litecoin, Binance Coin, Ethereum, Ripple, Steem, Ethereum classic, and Monero.
No, not Ethereum, rather Ethereum Classic. That is what we'll be discussing in this lecture. So, getting started with cryptocurrencies is often complex for beginners as it is. But when those getting started, start finding out one cryptocurrency essentially has two versions of it, it starts putting doubt into their mind into how to get started. That's the case we have with Ethereum and Ethereum Classic. Many people are confused by the two. How do they differ? Which should we actually be getting involved in? I'm going to break down Ethereum Classic for you now. So, you know exactly what it is, as well as how it differs from Ethereum. Before we get started, I want you to be aware that if you were not already at the Ethereum ecosystem works on the basis of smart contracts. These are automated contracts that enforce and facilitate the terms of the contract itself. Now, that's cleared up, let's move on. So, before delving into what Ethereum Classic actually is, it will be useful if you understood how we actually came about. Let me take you back a few steps and first mention the DAO, which stands for the Decentralized Autonomous Organization. The vision for the DAO was to become the middle organization between the Ethereum network and DApps that wanted to be deployed upon the Ethereum ecosystem. DApps simply means decentralized application. By purchasing the DAO tokens, you'd then be entitled to voice your opinion on the disdirection of certain DApps. Let's say you had a DApp that you wanted to publish. If the DApp went ahead as planned, this is how the process would have worked. One, get your stamp of approval by the curators, basicallys non figureheads in Ethereum. Two, get your DApp voted on by the DAO token holders. Three, if your DApp proposal gets a 20% approval vote, then you can get the funds to start. The potential this project had was incredible. It's key value propositions, whether they offered flexibility, control and complete transparency when it came to deploying DApps. The crowd sale for the DAO raised over $150 million in just 28 days. People were hungry to get involved. Now, I won't go too in depth into the DAO as that's not relevant, as it opens up a whole new can of worms. But insure there was a condition in the smart contract where you could exit from a DApp you pledged your tokens into, but you'd have to hold that ETH for about 28 days before you could reuse it. So, all sounds great at the moment. But that in itself was a loophole which was pointed out to the creators of the DAO who reassured the whole community, it wasn't an issue. However, as time shows now this was the exact thing that caused the Ethereum network to split. Now, if you as a token holder of the DAO wanted to exit, you'd simply do so by sending the request. The splitting function which was designed into the DAO, but it's a little more complex, would then take the following two steps. One, give you back your ETH in exchange for your DAO tokens. Two, register the transactions in the ledger and update the internal token balance. Moving forward now during June 2016, someone exploited that loophole with the DAO where you'd have to hold ETH for 28 days before you could reuse it. And managed to take approximately $50 million worth out of it, an obscene amount. What the hacker did, was alter the process we just mentioned in regards to how you'd exit a DApp if you're holding the token. So, this is the step the hacker took, one, took the DAO tokens from them and gave them the ETH they requested. Two, before the transaction registered the code went back to transfer more ETH for the same tokens. Three, carried on until $50 million worth of ETH was taken out and stored in a child DAO. So, that's how the hacker worked on trying to get this obscene amount of money out. But remember where I mentioned that the funds had to essentially sit there for 28 days before they could be used again. Well, this is where the Ethereum community jumped in. Soon after this, the Ethereum community decided they had three approaches to take. One, they don't do anything at all. Two, implement a soft fork. Three , implement a hard fork. The initial plan was to go with a soft fork, but they realized that implementing this would result in a denial of service attack. So, the only other option was to go with a hard fork. A hard folk is different from a soft fork, and that once it has been implemented there is no going back, and all users must upgrade to continue interacting with it. The split which was aimed at refunding all the money that had been taken from everyone during the DAO caused huge controversy. This eventually led to those who were anti-hard fork refusing to upgrade, hence renaming the old blockchain Ethereum Classic, whilst the new chain moved forward the original name of Ethereum. So, that's how my Ethereum was formed while Ethereum Classic. Now you might be wondering why did people oppose this decision, especially as the founders of Ethereum such as Vitalik Buterin, were moving to the new chain? You see the answer to that is a lot more complicated than it seems. It's based on the fact that Blockchain technology, the likes of Ethereum are supposed to be resilient against human whims. So, by hard forking, you're defeating its purpose, which is to be a stance against financial corruption. Remember, as Ethereum Classic is running on the older chain, it isn't able to gain access to the updates that are rolled out to Ethereum. One of which will be the switch from proof of work to proof of stake at some point. And it does get a lot more political within the ecosystem in regards to this whole debate. But for this lecture, it's not what we're discussing, but it really does open up a whole new spectrum. But just before we end on this lecture, I just want to run over one key pro and con of Ethereum and Ethereum Classic with you. Let's start with the pro for Ethereum Classic first. So, this follows the core purpose of this technology which is immutability. The con for Ethereum Classic is that it doesn't get access to all of the new updates made on the Ethereum chain. Switching over to cover a pro of Ethereum now. So, Ethereum is constantly updating with a growing group of partners such as the Ethereum Enterprise Alliance. And the con is that it went against the policy of the immutability. So, that's everything for this lecture. But it does bring into question where do we see Ethereum Classic going? No one really knows for sure. One thing we're certain of is that the value of cryptocurrencies comes from the trust that's placed within it. Ethereum has a huge advantage here with the formation of the Ethereum Enterprise Alliance and so on. That's everything on what Ethereum Classic is, and more importantly how it was formed. See you in the next lecture where we'll move on to another cryptocurrency, Monero.
Ravinder is an expert instructor in the field of cryptocurrencies and blockchain, having helped thousands of people learn about the subject. He's also the founder of B21 Block, an online cryptocurrency and blockchain school.