Ethereum explain how their ‘world computer’ works
This week Ethereum faced multiple challenges, one was from the Internet Computer project (ICP) that stated it is developing ‘smart contracts’ for the bitcoin blockchain. The other obstacle to Ethereum’s dominance came when a lead developer called Tim Beiko tweeted that the second-largest cryptocurrency’s long-awaited ‘merge’ will no longer happen in June, as was previously planned, and could now be pushed back to later in 2022. Ethereum currently has two blockchains running in tandem, a ‘proof of work’ and a ‘proof of stake’ chain.
The ‘merge’ of both chains has been eagerly awaited for many years and is hoped to transform Ethereum from an energy-hungry ‘proof of work’ transaction validation system to a ‘proof of stake’ one that uses approximately 99 percent less energy.
If Ethereum can lower its transaction fees and become a blockchain that uses less electricity, it will attract more institutional investors as it will then have more favourable ESG attributes.
It will also become more attractive to retail investors when it can settle transactions with lower gas fees.
Mr Beiko tweeted: “It won’t be June, but likely in the few months after. No firm date yet, but we’re definitely in the final chapter of proof of work on Ethereum.”
An alternative to Ethereum’s ‘smart contracts’ is being developed (Image: GETTY)
The news came as the price of ether, Ethereum’s native cryptocurrency, fell from $3,300 (£2526) last week to a low of $3,000 (£2297) today.
However, now Ethereum faces a challenge to its ‘smart contract’ system of automatic execution of transactions and agreements.
Ethereum is the world’s second-largest blockchain by market capitalisation and has always distinguished itself as being above and beyond bitcoin’s concept of a decentralised peer to peer system of monetary transactions.
Ethereum is a decentralised network of computers, the “Ethereum Virtual Machine” or world computer, that can deploy smart contracts that are at the core of applications for all types of use cases.
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Ethereum is the second largest cryptocurrency by market capitalisation (Image: GETTY)
Ethereum’s ‘smart contracts’ concept makes these agreements actionable without the need for a human intermediatory.
Such human interaction results in intermediaries that may have to be paid, or may hold up the process with a time lag, or even adversely manipulate the contract.
It is best to think of ‘smart contracts’ by using Nick Szabo’s metaphor of the vending machine.
A vending machine takes your pound coin and automates the contract between you and the drinks company by giving you back your can of Coke, and some change, without the need for any human intermediatory to verify the process.
Smart contracts are like a vending machine on steroids.
They can handle not only simple ‘pound coin to can of Coke’ transactions, but are able to advance this automatic execution of an agreement to everything from allocating car registration plates to creating and selling ownership contracts for music, film and digital artwork, called NFTs.
They can also be used to transfer property rights and have been praised as a technology that will change the world of the business, finance, property, film, art and legal sectors.
Smart contracts store rules on the blockchain, and they verify these rules and self-execute them automatically without the need for a human to check them.
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Ethereum is the second largest cryptocurrency by market capitalisation (Image: GETTY)
Ethereum’s ‘smart contracts’ are now the standard method for deploying NFTs and other applications on the blockchain, but they have vulnerabilities.
However, smart contracts are vulnerable to hackers, which has been evident by the number of hacks on decentralised finance across many blockchains that have occurred in the past few years, such as the Ethereum Dao hacking and Solana’s Wormhole hacking incident.
Now, a South Korean company called Protocon has developed a new concept, called the ‘contract model’, as an alternative technology.
The newly designed ‘contract model’ could fix the vulnerabilities inherent in Ethereum’s ‘smart contract’ design.
The CMO of Protocon, Jake Lee, spoke to Express.co.uk and said: “Since many accidents and hacking occur in the blockchain in smart contracts, finding a way to replace them is the most important task.”
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The South Korean company has developed a new system, called the ‘contract model’, that is composed of a Unit Contract Model and a Composite Contract Model.
The Web3 company and their new “Contract Model” concept has been described as offering “high reliability and security” in the blockchain industry that would be greatly needed for use in aviation, banking and even military systems.
Mr Lee added that the new design allows for increased “performance and security”.
He said this is “guaranteed because a Composite Contract Model can be easily structured by configuring a Unit Contract Model that has been verified in advance”.
He added that the new system “enables an environmentally-friendly network operation while processing more data with fewer resources” than Ethereum’s smart contract concept.
He also stated that any programming language can be used to programme applications in the ‘contract model’ system, whereas with Ethereum developers must learn the Solidity programming language.
This allows Protocon’s new Contract Model system to be coded in a language the programmer is most familiar with.
The Protocon test-net has been in operation since March 2022, and its mainnet, the official version of the new blockchain, is scheduled to be put into operation in August 2022.