A closer look at the Ethereum network market and challenges. Solidity, The DAO hack and the price of gas
While there is still a lot of debate going on about the true value of digital currencies and blockchain networks, the Ethereum network market provides a lot of clarity as to what actual users and developers believe the currency of the network is worth. As an investment, ether has been behaving similarly to bitcoin and has been showing a lot of growth in the recent years. At the time of the initial crowdsale that Ethereum cofounder Vitalik Buterin used to fund the project, the exchange rate was 1 bitcoin for 2,000 ethers. Bitcoin at the time was trading for a little over $600. Since then, ether currency has been growing very consistently. While it did fall a bit at times, the downward movements were tiny compared to the overall price increases of the currency, which at the time of crowdsale was about $0.30.
Analysis of the data on the Ethereum network shows that ether trading is driving the majority of the volume. While some people may argue that a large part of this trading is speculative, there is also no doubt that the Ethereum platform keeps attracting application developers and smart contract users. The number of transactions on the network has also been steadily rising, from about 40,000 a day in the summer of 2016 to 250,000 on July 1, 2017 to over 1 million transactions a day on certain days in December of 2017. While the volume and price have a high volatility, there is still a lot of consistency about the direction of the movement of the number of transactions.
Other positive indicators that show the growing popularity of the network are the rising number of nodes, unique addresses, and difficulty. The number of nodes in December of 2017 has surpassed 30,000, showing growth over 40% compared to November of 2017. In July of 2017, the Ethereum network had just over 5,000 on average.
While the results that the Ethereum developers and community have accomplished over a short period of time have been very impressive, there is still a lot of work to be done and a lot of challenges that the network has ahead. Below you will read about some of them.
Ethereum scripting language
The scripting language of the network is Solidity. This is the language that developers on the Ethereum network use to create smart contracts. The developers of the language are Gavin Wood, Alex Beregszaszi, and several other Ethereum contributors. Solidity is a very young scripting language. Wood proposed its creation in August of 2014. Currently, Solidity is the main programming language on the network.
Solidity was the reason for the famous DAO hack on the network. DAO is short for Decentralized Autonomous Organization. The idea behind the DAO is to enable users to create organizations that are completely autonomous and have decentralized control. DAOs would work because people would create sets of smart contracts on the Ethereum network that will run the decentralized organizations. There is an initial funding period. Once the period is over, DAO becomes active. “The DAO” was the first such organization while DAO is a generic name for the type of the organization. The DAO crowdsale began on April 30, 2016 and by May 15, 2016, has collected over USD$100 million. During the crowdsale, some experts shared concerns that the code of the project had vulnerabilities, which is what the creators of the DAO started working on.
The hack occurred in June of 2016. During the hack, an attacker was able to move over 3.5 million of ether tokens from the DAO into a child dao. It is important to underline here that the hackers were successful in attacking the code of The Dao project, not the code of the Ethereum network. The Ethereum network has always functioned in the way it has been supposed to function.
As of May of 2016, independent reviews have established that some parts of the Ethereum code had 50-100 bugs per 1,000 lines of code. While there is no such thing as the perfect code, code by Microsoft, for example, contains about 1 bug per 2,000 lines of code. This means that contracts on the Ethereum network need to be written very precisely. The state of Solidity is something that the Ethereum network will need to significantly improve moving forward into the future.
The Price of Gas
The economies of the transactions on the Ethereum network are still in their early stages and a lot of people believe that the price of gas on the network is too high. For example, in May of 2017, it would have cost about $250,000 to work with 1 Gigabyte of data on the Ethereum network. While most contracts are much smaller in size than 1 Gigabyte, storage and execution fees are still very expensive.