The Make Or Break Move For Ethereum You Need To Know About

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The Make Or Break Move For Ethereum You Need To Know About

The Ethereum Upgrade, It’s Here, Maybe

With the cryptocurrency markets wallowing near long-term lows traders are wondering what it will take to renew interest in the technology. Well my friends, let me tell you. The cryptocurrency markets are down for a couple of reasons and one of them is the long awaited upgrade and improvement of the Ethereum network.

Ethereum, the world’s most advanced cryptocurrency, has long been plagued by sluggish speeds, security issues, and inflationary concerns related to the POW style of blockchain mining. The upgrades, labeled Constantinople, is the second half of a consensus-backed hardfork that is aiming to solve many of these issues.

The upgrade will include 5 (five) EIP’s, Ethereum Improvement Protocols, including a reduction of block rewards that is intended to delay a difficulty bomb whose purpose is to facilitate the implementation of POS networking. The good news, the double good news, is that the upgrade is consensus-backed, as in it is a hardfork but it won’t result in a new coin, and that it’s actually coming after 18 months of speculation.

The upgrade is planned for mid-January and could be the spark ETH has needed to drive it higher. While the Constantinople upgrade won’t solve all the problems facing the Ethereum network it will help the implementation of second-layer solutions such as OmiseGo and Raiden. What this means is that ETH will see its value increase exponentially as a surge in OMG and Raiden value will compound any increase in value seen ETH.

Ethereum Price Analysis, HODL’ers Holding Out

ETH/USD has been drifting higher since hitting bottom in mid-December. The bottom, hit on low volume, bears the hallmarks of a bear-trap that traders should be wary of. While there is reason to think ETH may continue to see its value fall there are equally abundant reasons to think the opposite.

Over the last week the ETH/USD has reached a six-week high that is supported by the indicators. Both MACD and stochastic are bullish and suggest upward drift will continue until the upgrade goes into effect. Once done we should see ETH spike with a chance of hitting$200 or $220 within a few week’s of the release.

Longer-term ETH and all cryptocurrency/blockchain investments are being held back by regulation. Regulation, or lack of it, has kept investment dollars at bay and will continue to do so until a solid framework can be erected. The good news on this front is the BAAKT network. BAAKT is a joint-venture between ICE and partners and the best crytp-based infrastructure on the planet because it is SEC/CFTC compliant (exchange trading, clearing houses, third-party custodial services).

Bottom line; Ethereum is on the brink of truly changing the blockchain ecosphere. The combination of ETH upgrades, the switch to POS, and the added catalysts of US regulation is a force that will push ETH to retest its all-time highs (sooner or later).

Everything you need to know about the Ethereum “hard fork”

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Ethereum burst onto the virtual currency scene almost a year ago. It’s similar to bitcoin, but with a key difference. In addition to supporting its own digital currency, ether, it also supports smart contracts, agreements written in computer code that execute automatically when conditions are met.

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Though it garnered significant attention from the start, Ethereum’s biggest moment came in April 2020, with a radical experiment called the Distributed Autonomous Organization, or the DAO. Created by German blockchain startup Slock.it, the DAO had an ambitious goal—to build a humanless venture capital firm that would allow the investors to make all the decisions through smart contracts. There would be no leaders, no authorities. Only rules coded by humans, and executed by computer protocols.

Launched on April 30th, it took off like a runaway train. By May 21, it had raised $150 million from roughly 11,000 investors, in what’s considered the biggest crowdfunding effort in history.

For Ethereum, the backbone of the project, it was a major vote of confidence in its nascent technology.

Then it got hacked.

On June 17th, someone started siphoning money out of the DAO. People were watching in real time as the money was stolen—like a live video feed of a bank robbery. By the end, the hacker, who has said that he was simply taking advantage of a technical loophole in the DAO, had amassed $50 million in ether, based on current exchange rates.

While the core developers who designed and run Ethereum didn’t really have anything to do with the DAO, they were left to deal with the mess. The seven of them, led by Vitalik Buterin, decided to hack the hacker.

They managed to stop the theft and move the funds into another smart contract where they currently sit. But that’s only a temporary stopgap: the way the code of DAO was written, there is a question of whether the original hacker can still lay claim to the funds. Fixing this would require more intervention from the core developers.

Whether to do so has created an existential question for Ethereum. One of its underlying tenets is that it’s a decentralized platform, meaning the power lies almost exclusively with all of its users. By stepping in to fix this problem, it would completely undermine that objective. This has led to a heated debate between those who want to return the funds and the “code is king” purists who say that the the power of smart contracts lies in their immutability.

The intervention that’s being weighed is called a “fork.” It’s a decentralized network’s version of a reset button. It would entail rolling back the entire Ethereum network to a previous day. Doing so would basically eliminate the DAO, and move all the money into a smart contract that can only reimburse investors.

The initial proposal was a soft fork. This would entail a majority of the Ethereum miners (those who verify transactions on the network) voting on the roll back. Unfortunately, a security flaw was found in the voting process, which eliminated this option.

That leaves a hard fork, where the core developers of Ethereum unilaterally make the decision to essentially create a new version of the network with different rules than the original. Then, miners, exchanges, and other major apps that are built on it need to decide if they want to a part of the new version of Ethereum or the original. Hence, the idea of a fork.

“The Hard Fork is a delicate topic and the way we see it, no decision is the right one. As this is not a decision that can be made by the foundation or any other single entity, we again turn towards the community to assess its wishes in order to provide the most appropriate protocol change,” Ethereum cofounder Jeffrey Wilcox wrote in a blog post Friday (July 15).

The community seems unanimous—according to Ethereum’s publicly available Github code, a hard fork is tentatively scheduled for July 20.

But, after all this turmoil, several questions remain:

What happens to the banks working on smart contracts?

Ethereum’s greatest promise lies in its ability to offer smart contracts, which are basically small programs, built on its blockchain. Financial institutions believe smart contracts offer a way to cut costs and speed up trading and settlement. Big banks like Citi and J.P. Morgan, along with clearinghouses like the Depository Trust & Clearing Corporation, have been building and testing ways to trade credit default swaps with smart contracts, for instance.

Analysts think smart contracts, if developed sufficiently, could eventually replace lawyers and judges in some cases. “Doing so in principle removes the potential for parties to have a dispute: both parties are held to whatever outcome the smart contract determines,” writes Houman Shadab, a professor at the New York Law School who specializes in the area.

An Ethereum hard fork, however, could be a spanner in the works. If contracts held to be inviolable can effectively be overturned by a collective decision to run new software, what guarantee do financial institutions have that their transactions and funds are secure? “I think this exposes one of the problems [facing financial institutions],” says Simon Taylor, a co-founder of financial technology consultancy 11FS, based in London.

Taylor, who headed blockchain projects at Barclays until last month, says incidents like the DAO hack and the hard fork only underscore the need for banks and other regulated institutions to build their own private blockchains. Banks can reduce the threat of a community decision being implemented without their support. “If you want results now, the answer must be to build a [virtual private network] for asset transfer,” Taylor says. “This is undoubtedly the right choice for financial institutions.”

Another bank insider thinks financial institutions will simply take a hard fork in stride. The technology is so new that banks are still in a research and development phase, so they have ample time to price in assumptions around any potential future forks, says Huy Nguyen Trieu, a well-known fintech analyst and until recently a managing director at Citi in London. “Whether you have a hard fork or soft fork, the cat is already out of the bag,” he says. “So it doesn’t change anything. Even if there was [a hard fork], whenever [banks] think of a smart contract, they will take it into account.”

What about the moral hazard of a “bailout”?

One of Ethereum’s core principles is that it offers a way for developers to write decentralized applications that external parties can’t alter. These applications will exist “without any possibility of downtime, censorship, fraud or third-party interference,” says Ethereum’s official documentation.

What would be the point of this? One example might be a smart contract that disbursed funds to activists in an oppressive regime. It can’t simply be shut down by a cease-and-desist order delivered to an office, or even by sending in troops to cart away servers. That’s because that particular pool of funds exists as an application on the Ethereum blockchain, which is dispersed around the world on whatever servers run its code.

This property of Ethereum is known as censorship resistance. But if a hard fork is implemented to reverse a smart contract gone wrong, doesn’t this violate the principle of censorship resistance? “If you take the direction of restoring value to people who lost value, you break the idea of smart contracts,” says Vinay Gupta, a London-based strategist at Consensys, one of the most well known development firms working on Ethereum. ”Maybe we can justify this as a one-off, and it won’t happen again. But maybe it opens the door to a never-ending string of complaints from people who lost 25 cents and want it back.”

The decision to hard-fork the protocol in order to return the hacked funds is a sort of moral hazard for the cryptocurrency world. Just as central bankers were confronted with having to bail out failing banks in 2008, the miners, exchanges, and companies in the Ethereum economy now must face the prospect of a systemic intervention to right a wrong. The irony isn’t lost on Gupta. ”It turns out we have a lot in common with central banks,” he says. “Maybe not at the technical or legal level, but at a political level, people in our community expect us to be able to make things better for them.”

Even a true believer in Ethereum like Gupta is aware that a hard fork could be a serious violation of the principles that underlie the protocol. He stops short of saying a hard fork is a bad idea, but notes that “there are convincing arguments” on both sides. The decision to fork, or not, is a bit like voting for Brexit, he says. “ There’s no way in the UK right now that you can make any kind of comfortable prediction of our economy, because it’s changed, but we don’t know what the new rules will be,” he says. “It’s that sort of prolonged uncertainty.”

And, like Brexit, the Ethereum economy will be gambling with its future if it collectively agrees to pursue a fork. “We just have to roll the dice and see what happens,” Gupta says.

What happens to the price of Ether?

Ether’s price has tumbled from a high of about $15 as the DAO gained momentum to a current price of about $10. That’s instructive, because despite the uncertainty surrounding a potentially major change to the Ethereum codebase, the price has remained relatively stable.

While a decline of 33% might seem like a steep drop, it’s important to remember that this is roughly what ether was trading at in the months before the DAO launched. The DAO triggered a sharp spike in the price of ether as people bought the currency to participate in the experiment. So a drop back to the $10 level, even with a fork looming, is a vote of confidence from the market. At the start of the year, ether was trading at under a dollar.

That suggests the ether market has priced in the hard fork decision. Joe Lee, a co-founder of bitcoin derivatives platform Magnr in London, expects a successful hard fork decision to therefore boost the price of ether. ”I see this as validation that the community can build a very powerful system like Ethereum in the right way,” he says.

Lee has a price target of $15 for ether before the year is up, returning it to its pre-DAO hack heights.

Despite the drama over the previous weeks around the DAO hack, counter-hack, and forking proposals, the outlook for Ethereum is, implausibly, bright. Observers point to the way Ethereum developers have rapidly developed alternatives to solve the flood of technical and ethical problems revealed by the hack.

Emin Gün Sirer, the Cornell professor who has perhaps contributed the most research in the aftermath of the DAO hack, contrasts the way the Ethereum world has adapted to his discoveries of technical flaws with the DAO and its subsequent fixes. “The Ethereum community has been amazingly science-driven, open and forthright. The civilness of their response should be a shining example to other communities,” he wrote.

Litecoin vs. Ethereum

In this battle of the altcoins, which is the best modern cryptocurrency?

YurikoNakao/GettyImages When it comes to investing in cryptocurrencies, nothing is a sure thing. If last year’s major booms and busts told us anything, it’s that you can expect volatility, wherever you go. That said, diversifying your crypto-portfolio is a wise move, as although bitcoin often drags everything up and down with it, there are some tokens that do things better than others.

But which alternative currencies should you invest in? We have our favorites, but if you want to put your eggs into one specific basket, you need to look at the differences between some of the best options. What about if we pit Litecoin vs. Ethereum? Which one comes out on top?

Litecoin has been around a lot longer than Ethereum, but Ether has grown in value far quicker. Then there are smart-contracts to consider. In this guide we’ll break down the key differences between these two altcoins, to give you the best basis for your own cryptocurrency investments.

If you’d rather skip all that and just look at how to buy Ethereum or trade your coins for something else, we have guides for that too.

As a store of value

With all the furor surrounding Bitcoin and its contemporaries’ massive value spike throughout — and particularly at the end — of 2020, one of the biggest concerns for those looking to buy cryptocurrency is whether they’ll retain their value. The short answer to that is nobody knows. Cryptocurrencies are incredibly volatile and can rise and crash tens of percentage points in a single day, but some are proven more than others and may be more stable investments for the future.

Debuting in 2020, Litecoin is one of the oldest cryptocurrencies, so it has one of the best records for retaining or increasing in value. It also has strong name recognition, which with many hundreds of alternative cryptocurrencies out there, is an important facet in and of itself. Many exchanges now support Litecoin, which makes buying and selling it easier. That too should help it store value long-term.

Ethereum is not as old as Litecoin — it only came into existence in 2020 — but it’s quickly garnered interest for its potential uses beyond cryptocurrencies, which we’ll address in more detail later in this guide.

That interest has increased Ethereum’s name recognition. It’s separate enough from the “coin” nomenclature that it can strike out on its own a little easier, and it’s seeing growing support from exchanges. It’s still not common to see Ether used as a payment method, but that is steadily growing too.

Other factors worth considering in this debate are that Litecoin has a definitive 84 million token maximum, meaning that at some point in the future there will be no new Litecoin created. Ether, on the other hand, will continue to be awarded for mining into the foreseeable future. The developers may one day cap it, but that has yet to happen. The scarcity brought about by a limitation on the number of tokens could mean that Litecoin ends up being a more valuable cryptocurrency in the future.

For now, Ethereum seems likely to be the best store of value. It has a much higher and growing interest from the wider cryptocurrency community, and despite its younger age, its growing name recognition and availability should drive it forward, making it easier to purchase, access, and spend. Ethereum would likely disappear only if cryptocurrencies, as a whole, went kaput.

As a transaction medium

The main reason cryptocurrencies came to exist, at least initially, was as a form of entirely decentralized digital money. That means using it to buy goods and services. As we’ve seen with Bitcoin, scaling difficulties can make that far harder to achieve, especially if you aren’t willing to pay huge fees. So how do Litecoin and Ethereum compare in that respect?

Considering Litecoin was originally created to be a better online transactional medium than Bitcoin, it’s no surprise that it’s pretty good at it. At the time of writing its median transaction fee is just $0.04 with a block time average of 2:19 (minutes/seconds). Confirmations come pretty quick — around four times faster than Bitcoin.

That makes Litecoin great for conducting transactions online, especially considering the growing number of online outlets that accept it. Ethereum is equally viable, however. Although its average fees are much higher — its median rate is around $0.85 — the Ethereum block time is under 15 seconds. You can expect your transfers to receive multiple confirmations in a minute or less.

That’s why over the past year we’re seen Ethereum become the most traded cryptocurrency in the world, with more than a million transactions taking place some days. In comparison, Litecoin handles just over 50,000 transactions a day, while even Bitcoin handles 230,000 or so. Ethereum is trading hands with incredible frequency.

Both Litecoin and Ethereum have their strengths in transactions. While Litecoin is the cheaper of the two to spend online, owners appear to be more interested in using Ether for the time being. Its short block time is hard to beat.

Beyond cryptocurrencies

While Litecoin is a cryptocurrency through and through, Ethereum is a little smarter than that. Ethereum itself is more than the Ether token. It’s also a platform that can facilitate Ether transactions in its own right. These are called “smart contracts.”

We go into more detail on smart contracts in our discussion of Ethereum, but in short, blockchain technology underpins a smart contact to engender trust. Instead of lawyers confirming a contract has been adhered to, the blockchain does it automatically. The contracts can tell when goods or services have been transferred, and Ether payments are then automatically sent.

It’s a pie in the sky idea, but theoretically smart contracts could eliminate all sorts of middlemen, from crowd-funding websites — have a smart contract send funds when milestones are reached — to real estate — send purchase funds when the owners have completed their end of the bargain.

Litecoin has no such goals and that’s fine, but it does mean it’s decidedly less functional than its younger sibling. Ethereum is the natural evolution of the decentralizing idea of cryptocurrencies that began with Bitcoin. Litecoin is more of an iteration on that early idea.

So which is best?

As with all cryptocurrency head to heads, naming one a champion over the other is hard. There are no guarantees in any of them and one could crash and burn tomorrow while another soars in value. That said, we do have our favorites and as it stands, Ethereum is the more functional, the more versatile, and the more technically impressive of these two cryptocurrencies.

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