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The Ethereum / Ethereum Classic “Replay Attack” explained

In the recent days – when Ethereum’s Ether-blockchain forked into ETH and ETC – we could not do else but read the term “Replay Attack”. If you wondered what exactly a replay attack is, continue to read. I will explain.

The basis of the Replay Attack is the fact that all wallets which contained Ether at the time of the fork will credit their corresponsing Ethereum Classic wallets with ETC. So, if you had, say, 100 ETH in your wallet, then you’ll be credited with 100 ETC.
But that’s not an automatic process (well, it is, but only under certain circumstances): it only works on exchanges which support the quasi-new Ethereum Classic chain.

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Ethereum Classic

Ethereum Classic Trading Has Launched

Tonight, ETC (Ethereum Classic) trading has launched on Poloniex. Some folks have decided to stick to the principles of blockchain and not support the idea of just rolling things back for minor purposes. That’s when Ethereum Classic was born.
Reasoning behind the creation of ETC was the strong belief that the resolution of the DAO debacle was handled “in the worst way possible”, and that there’s still a significant minority opposition which was against the DAO bailout hard fork:

“The main goal of the project is to ensure survival of the original Ethereum blockchain. We will strive to provide alternative for people who strongly disagree with DAO bailout and the direction Ethereum Foundation is taking their project. Anyone opting to remain on the original chain should have such opportunity.” – ethereumclassic.github.io

Plans are to continuously develop the Classic fork and “maintain upstream patches similar to the relation between Redhat and CentOS, until a community can form around the project and create a road map”.

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Why I Stopped Trading Ethereum

First off: Ethereum is – compared to many, many other cryptocurrency projects – a great project, and its tokens, Ether, are being traded on the exchanges for quite some time, now. With price moving up and price moving down. But as Ethereum gained more popularity, the down phases suddenly became rare. Volumes of 1.000 BTC only on Poloniex became common, and soon, the daily amount being traded increased well into the five figures – sometimes even close to 100.000 BTC on a single day.
Yes. That’s right. 10.000.000 USD worth of traded Ether and more, and an increase in value of 60x the IPO price. People (that being traders, “investors”, regular shitcoiners and what not) were in a great mood and shorting Ether became the new synonym for financial suicide. Things were great and lots of profits were made (as long as you didn’t have that stupid idea of shorting Ether).

Bad news, security incidents or anything that would earn any other cryptocurrency you can think of a horrible death didn’t seem to affect Ether. Users in crypto related chatrooms were preparing their shorts (“It just has to dump on this!”), just to find themselves being margin called later on. I have refrained from shorting ETH after two small failed attempts, but what happened there just didn’t feel right.

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Bitcoin, Cryptocurrency and other Exchanges

I will give you a list of a couple of cryptocurrency exchanges which have been around for some time and can thus be used with as little risk as possible.

bitfinex.com

Bitfinex is an exchange which offers Bitcoin, Litecoin and Ethereum trading. With those three, you can use your account to do the following:

  • Spot trading: buy or sell any of these cryptocurrencies.
  • Margin trading: you can also trade USD, BTC, LTC and ETH on 3.3x margin. For more information, I will include a tutorial on margin trading later.
  • Lending: You can use your funds to provide liquidity to the markets (for the margin traders) and get a certain percentage paid daily.

okcoin.com

OKCoin is a Chinese exchange which also provides an international version of its exchange. You can trade Bitcoin and Litecoin against US Dollar.
OKCoin is famous for its insane leverage (10x and 20x) on its Futures. There’s rumor (especially on Twitter) of people who made a lot of money trading OKCoin Futures, but there are also stories of users who have lost a lot of money there.

20x (well, even 10x) is a lot – even more so on a currency like Bitcoin which already has a lot of volatility on its own – and you should only trade there if you know exactly what you’re doing.

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