Ethereum is Mastercoin 2.0
A group of people are dissatisfied with the progress of bitcoin and want something that's better that can support smart contracts. They decide that since bitcoin's not doing it, that they'll create something themselves. They want funding and decide that the best way to do so would be to crowd-fund the project through a bitcoin address that they'll give their new tokens for. A huge funding event happens and they raise a lot of money. Development takes a suspiciously long time. And when it's released, there's a second huge PR bump.
I'm sure you've guessed by now that I'm not talking about Ethereum, but Mastercoin, the original Bitcoin 2.0 smart contract platform. For those that weren't paying attention to the cryptocurrency space 3 years ago, mastercoin was a big deal. The crowd-fund raised over 5000 btc, which traded at 0.01 btc to 1 msc. A lot of people put money into it and a lot of money was spent on developers to get the platform working.
It took some time, but mastercoin was released to great fanfare and mastercoins actually traded at 0.25 btc to 1 msc at its height. Today, the coin is very thinly traded (less than $1000 worth per day), the coin now trades at 0.002 btc to 1 msc and has a market capitalization of less than $1 million, down from over $100 million in its heyday. It's continuing its downtrend and there are a lot of holders that can't get out because there's so little liquidity.
Things got so bad that early last year, mastercoin changed its name to omni. That change didn't help at all as it proceeded to lose 80% of its value since then.
So what happened? How did the biggest smart contract startup end up down in the dumps? It's a story that needs to be told because too many new entrants to the cryptocurrency space have an amnesia about these failures.
Here were some red flags:
- Promises of amazing new applications
- Promises of an insanely fast development time
- Very little actual useful applications
- A staggering amount of people involved that contributed very little in terms of code
The results weren't pretty. This post pretty much obliterated any delusions people had of mastercoin being a decent platform for smart contracts. This post showed the flaws in the platform including how an address had 4 different balances depending on which mastercoin explorer was used.
What's interesting is that Daniel Krawisz (author of the above article) has written a similarly scathing review of Ethereum. Ethereum raised a lot more money, so they'll probably last longer than 2.5 years, but the similarities between Ethereum and Mastercoin cannot be ignored.
If a smart contract platform comes out that's actually usable, I would expect these things to have happened:
- A development timeline in line with an Operating System (3-5 years) instead of a website (6-18 months)
- A specification that is very thorough about exactly what every command is supposed to do
- No crowd funding
- Involvement of very few, if any, non-coders, at least until year 3.
Learn from history, too many people seem to be ignoring it these days.
Upvoted you
From a technology perspective, Ethereum is light-years ahead of Mastercoin. I spent countless hours warning people about Mastercoin back before and during the crowd sale.
At this point Ethereum doesn't need to deliver on smart contracts, it is simply a better Bitcoin. It has enough market cap, liquidity, and hype that it will continue for years. I highly doubt that Ethereum will ever fall below Litecoin or Ripple.
Thanks for the comment!
Fair enough analysis that Ethereum is ahead of Mastercoin. I don't think that's saying that much, though. A monkey randomly typing on a keyboard would be only 5% worse than what Mastercoin came up with.
There were so many vulnerabilities in Mastercoin that nothing actually was made on it. Ethereum has at least gone above that threshold, but then look what's happened. There's a clear vulnerability in how you make smart contracts in Ethereum and it's led to this huge DAO theft. The complexity of Ethereum's system is at least an order of magnitude more than that of bitcoin and I would argue that's going to lead to many more vulnerabilities in the future.
Once smart contracts are found to be horrendously expensive to secure, I think it will start a fall that won't be stopped. Interest will wane until the next project.
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This may or may not be true. I have some reason to doubt, though. Remember that the complexity of ethereum is very high and that any security hole potentially costs people lots of money. I believe there will be far more exploits than this one and that as smart contracts have more risk associated with them, there will be more of a demand for auditing the code. Auditing code, especially in the javascript-like environment that ethereum has is not simple and to get any guarantees is going to be very hard. It would be one thing if this were OCaml or something similar that can provide some proofs, this is not that.
Hence, the costs to audit and provide guarantees on even a small contact are going to be very expensive. Think like 100-200 hours of expensive developer auditing time per 10 hours of developer coding time. It's much easier to code than to audit and the set of developers that can code something is much larger than the set of developers that can audit it.
In other words, this is going to be a very expensive thing to do. Perhaps there will be a market for smart contract auditing services and the like which can streamline this stuff, but for now, that doesn't exist. I still think this is going to be a much rougher road than perhaps you and dantheman seem to think for ethereum.
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Sorry, I think I misunderstood. I thought you were saying that smart contracts wouldn't be expensive to secure.
My mistake. I was the one who was confused about your comment, which I completely agree with. I deleted my confused comments.