While bitcoin was built for payment processing, Ethereum has bigger plans for its blockchain. It was developed from the start not just to record transactions, but to run code, giving it the ability to perform smart contracts: Transactions that decide for themselves when they are ready to execute.
Ethereum’s smart contracts are written in a new programming language, Solidity. You write your code and run it on Ethereum’s global, decentralized software platform, the current version of which is called Homestead. The smart contracts can be used to create private cryptocurrencies, manage crowdfunded sales, build autonomous democratic organizations, and more.
Trust in Ethereum is based on the principle that code is law, which leads to problems if someone gets their code wrong.
Humans have stepped in to overrule things a couple of times.
The first was in June 2016 when someone exploited a loophole in a smart contract running a venture capital fund called The DAO to destroy a third of its value. Reversing the DAO exploit required asking all Ethereum users to accept a manual modification of the shared ledger: Those that accepted are now using a blockchain called “Ethereum”, while those that refused use “Ethereum Classic.” For many users the fork is transparent: The blockchain they are using continues to grow as before, with the exception that they can no longer use it to interact with businesses building on the other fork.
The second incident was in November 2017, when someone accidentally triggered a bug in hundreds of smart wallets created by Parity, irreversibly locking the funds in them. With cryptocurrency worth US$160 million at stake, Parity and its users may yet call for a hard fork to solve its own problems.
Businesses building on Ethereum should be aware that, while someone might be there to save them if they make a really expensive goof, they’ll likely experience some disruption if other businesses need bailing out.