In addition, enthusiasts in the blockchain industry often speak of Ethereum and smart contracts. So what are these technologies?
Great advancements have been realized by the Internet, but some estimates there is less than 2000 individuals in the world who can develop blockchain applications, some even say less than two hundred. Exaggerations aside, it shows the difficulties of developing blockchain applications at a glance. It's just like developing an App on a mobile phone without an operating system, which involves all kind of heavy-lifting tasks such as developing the basic infrastructure from the start and requires highly sophisticated knowledge of software and hardware development as well as cryptography. So, as one could have imagined, operating system resemble to Android or iOS could lower the barrier for entry for blockchain development. Ethereum is such an operating system designed for blockchain applications.
Ethereum is an open-sourced infrastructure for blockchain applications just like what Android is for smartphones. It provides rich APIs and interfaces so that many could develop applications on top of it quickly. Over 200 applications are being developed on Ethereum.
Smart-contract is the most significant feature of what Ethereum brings to the table. Smart contract was first introduced by cryptologist Nick Szabo back in 1994, a term that refers to a set of digitally defined promises and the protocol to execute it among relevant parties.
The word 'smart' in smart contract is just like the word 'smart' in smart phone, it offers flexibilities that's different from Artificial Intelligence. No one could intervene the execution of a smart contract once it goes online, and it will keep running without any intermediaries.
Blockchain offers a trusted environment to run smart contract, in turn, the smart contract expand the applications for blockchain. The ethereum-based smart contract can manage complex operations of various digital assets. With the increasing usage of smart contract in daily life, people has realized that without strict and thorough verification, the bugs hidden behind could then be exploited for bad will. The DAO accident also reminds many people to rethink the security of smart contract.
The DAO is a decentralized autonomous venture fund based on Ethereum where everyone can participate with Ether at any time. Its purpose is to invest in all kinds blockchain projects by collective-decision without the involvement of any centralized manager. The project has collected more than 150 million dollars within 28 days and known as the biggest crowd-funding project in the world. But recent security issues with the DAO have exposed its capital to hackers which followed by larceny. Since then, several concerns have been raised for the security of smart-contracts and Etherum.
In light of the recent event and after undergoing careful analysis, it became clear that the security breach was caused by the bugs in The DAO's smart contracts rather than Ethereum itself, thus allowing the hackers to take advantage of the loophole. This incident brought awareness to the community realizing that smart contracts are just like traditional contracts; the complexity in detail requires rigorous checks and audits of the programming code. If the bugs in the system are overlooked, there will be serious consequences. We can not simply dismiss the importance of a legal contract just because of it may contain loopholes, same goes for smart contracts. Although we may need a group of experts to audit its code in the future to prevent further exploitation. Got it?