How Ethereum Works
Ethereum uses blockchain technology to create and negotiate smart contracts. These contracts are carried out through Ether, the cryptocurrency’s medium of exchange. The organization of contracts is called DAO or Decentralized Autonomous Organization. The benefit of these contracts is that they form a decentralized unit which protects against fraudulent actions and outside control. Ether is kept in an Ethereum Wallet and allows its users to make contracts. The system is like a computer that is shared by a number of users with services paid for in Ether.
A New Kind of Ethereum
There was a major change to Ethereum with a hard fork, which made significant changes in the cryptocurrency. Bitcoin’s hard fork created a distinct currency, whereas Ethereum’s hard fork, called Byzantium, was similar to an upgrade that altered the functioning of the existing cryptocurrency. Many have praised the new version of Ethereum as having improved scalability and creating a more reliable currency. The split in the currency created Ethereum and Ethereum Classic. The two versions are the same up to the time of the split, which means that any transactions performed under the old form of Ethereum before the division are still valid.
The Reason for the Split
Although Ethereum Classic still functions in a similar way to regular Ethereum through decentralized contracts, there are significant differences between these two versions.
The creation of the hard fork was the result of a study that detailed problems in the security of the DAO architecture. Following this study, the DAO was hacked with a loss of $50 million.
There has been a significant controversy in the Ethereum community over this split, and some prefer the older version of the cryptocurrency. Those who supported the hard fork wanted greater control over their cryptocurrency and the ability to vary code terms and conditions. Those who were opposed to the split believe that code is law and the original conditions should apply. Supporters of the new Ethereum believe it is more secure than the older form of the cryptocurrency because they believe that relying too heavily on the original code could make the system vulnerable to manipulation by hackers.
Ethereum allows multiple software developers to work on the blockchain and do not put it in control of a single company. Those who prefer Ethereum Classic believe that a hacking operation should not cause a complete revision of the cryptocurrency and prefer reliance on a stable code. Users who did not agree with the hard fork and want to use Ethereum Classic can simply keep the older version. This disagreement over the hard fork has led to two kinds of Ethereum, although unlike Bitcoin, the hard fork did not actually create a completely new currency.
Which Kind of Ethereum Is Best?
The founders of Ethereum, Vitalik Buterin and Gavin Wood, switched over the new version of Ethereum, but there are still many people who prefer Ethereum Classic. Some cryptocurrency holders and investors are attracted to the notion of an immutable system that adheres to the same coding principles and feel that it is more secure. Others opt for the new version of Ethereum, which they feel allows for more flexibility and scalability and benefits from the expertise of multiple software developers.