What is Ethereum?
Conducting transactions through a third party means we need to assume that the third party conducts the transactions in a secure manner, however these assumptions have been proven to be false, or inconsistent, exemplified by examples such as the Mt.Gox incident.
Ethereum, a “Crypto 2.0” system, is a cross between a programming language and a platform. As it’s completely open protocol, it allows developers to develop in languages that they’re familiar with.
The aim is to allow any developer to create applications using Ethereum, which is used as an exchange token on a decentralised network.
Thereby using Ethereum to decentralise any item, from crowdfunding and domain names to trading contracts such as OpenBazaar, to being used as a democratic voting platform.
Potential of Ethereum
Currently Ethereum has three major types of applications:
- Financial:The financial applications empower users buy allowing them to enter into completely arbitrary contracts and giving them freedom over their Capital. A contract involving a savings account may include two partners, Partner 1 and Partner 2.Each Partner alone can only withdraw 1% of the funds per day, however together they can withdraw any amount. So if one is hacked then the other partner can withdraw the funds into another contract. If one partner loses their key the other Partner will eventually withdraw all the funds.
- Semi-financial: This involves capital and non-capital goods such as purchases or services. Peer-to-peer gambling like ‘BetMoose’ and decentralized marketplaces such as OpenBazaar, are other possible applications of Ethereum.
- Decentralised governance: This involves things like voting and other means of bartering or exchanging information. It would even be possible to create a decentralized data feed.
Combining Bitcoin with Ethereum
You can fit Ethereum’s concepts such as contracts that have funds, variable code, and multiple states, that are verified by the network with anonymous triggering through transactions, with Bitcoin.
If the verification of the network is exchange by reputable oracles, then this becomes a possible.
A distributed contract will send a transaction until all the stipulations outlined in the contract are met.
Existing in a network such as Ethereum, with it’s own value and information. It executes transactions according to pre-installed information. No one has complete ownership of a contract. Most cases a third-party arbitrator is needed to verify that the conditions of the contract are met, commonly known as Oracle.
This would however create several Vulnerabilities:
- The oracle could be hacked,
- The oracle could disappear before transaction completion,
- Corrupt oracle,
- Uncertainty pertaining to the oracles output.
Orisi views a single server approach as being inadequate when it comes to security.
It proposes a set of distributed oracles, run by several trustworthy parties instead of one arbitrator. With majority of the group having to agree on an outcome for the transaction to be finalized or nullified.
This has a plethora of benefits,
- This would increase difficulty as well as expense of bribing more than half a set of oracles,
- A more Judgemental process would occur.
- Hacking become more difficult due to the range of hosting providers,
- as well as a Variation in computer and hardware,
- Improving software security due to long-term community involvement.
Ethereum allows arbitrary contracts that allow for multiple person ownership to be created with ease. Agreement as to the conditions of a contract by the contract holders would allow for the protection of funds, coupled with Orisi’s series of Oracles to arbitrate when contract owners cannot reach a resolution, and a decentralized democratic system that rewards people for fairness immediately develops. This funnels directly into the online gambling sphere.
Introducing BetMoose, an online gambling platform run by co-founder and CEO Adam King. It is an online gambling platform that allows anyone to bet or host bets on any topic, from Politics to oil prices. Each bet is publicly displayed and BetMoose has no affiliation with bets posted on the site although they remove inappropriate or illegal content.
They intend to implement private contracts, in order to allow person to person betting with a counter beter, anonymously. BetMoose prides itself in person to person connections which a radical change from traditional betting exchanges that are either run with a ledger controlled by the exchange, that constraints the bets due to site rules or the amount allowed to bet of private bettering between a group of in person friends that is not heavily involved.
BetMoose also places a large focus on user friendliness, an ordinary calculator runs the maths behind all bets which they believe will entice more people to bet due to greater transparency.
A host can benefit from betting by accepting a certain percentage from every payout, this turns BetMoose to create a platform from anything from female beauty contest to stock options. A personal page can be shared to gather betters to one simple hub, or to assist in gathering users in case of conflict. If something is not resolved within a certain time frame, BetMoose might intervene and resolve such issues, however moderators have no control over undisputed bets. Bets that have no easy solution can be cancelled, sending all funds back to the original owners. Also, BetMoose only charges fees on those who come out of a bet with a positive amount.
With suggestions that BetMoose should use a system similar to orsi’s multiple oracles could be used instead of having BetMoose arbitrate disputes. This would create a series of arbitrators who decide whether or not a bet should go through in light of a dispute. If the clients in conflict cannot resolve it between themselves a group of their peers would be gathered whether through BetMoose or through a universal arbitration system and the contract would complete the bet by majority vote.
With the creation of an environment where an individual doesn’t feel in danger of having their money unjustly stripped from them by centralised companies and corporations -ehem PayPal.
Bitcoin would provide an online market that’s free of much of the risk that online marketplaces have had thus far. Combining this with completely arbitrary rules that allow users to choose limits that they subscribe to, such as OpenBazaar we’re seeing the beginning of a new development in online commerce.
What is emerging is a community that’s based on fairness due to personal benefit that immediately applies to financial conflicts. It would encourage non-Oracles to become Oracles, due to the benefits and justness, as well helping to foster a healthy marketplace. It also make Bitcoin investment more appealing to outsiders as it would remove any previous misconceptions about it being an insecure platform. This would encourage people to look for alternatives instead of turning away from online commerce when they’re encountered with unjust or unfavourable rulings. Alternatives which are found in Bitcoin based markets with Bit-thereum style contract systems and an oracle style arbitration system. This model will raise the Bitcoin price by fueling new markets with a hoard of desiring customers looking for an alternative to the current online.