Ethereum: Taking Blockchain to the Next Level
Ethereum is one of the new kids on the block and let me be the first to tell you… It’s not going anywhere.
Released on July 30th, 2015, Ethereum has had no lack of hype surrounding it. For the amount of time that it has been present in the marketplace, it’s risen to become the only notable rival to Bitcoin in terms of market share. Before we delve into the meat and potatoes of what defines this coin, it’s important to highlight a differentiation that newbies tend to confuse. Ethereum is a structure upon which smart-contracts are developed and Ether is the coin, or currency that fuels these contracts.
So now that we’ve got that small piece of important information fleshed out, let’s go on a small journey towards finding out what defines the pro’s and con’s of Ether, and what really differentiates it from other coins.
Pro’s and defining aspects of Ethereum:
1. Utility. Whereas Bitcoin was developed to replace the notes inside of your pocket, Ethereum has been designed with the utility of smart contracts in mind. Ethereum is a programmatic platform that can be utilized to build, deploy and implement ‘smart contracts’ equally contributed by human and computer counterparties. It’s much more than just an “altcoin…” It’s a structure. It’s original design wasn’t intended to disrupt currency markets as is the strategy with most coins, but instead provide a utility to the blockchain.
2. Ether, the gas, or currency for Ethereum is used to specifically finance the internal processes and happenings of Ethereum. Bitcoin’s value is halted past its use as a currency alternative, where Ethereum can be an alternative structure, fueled by Ether. This means that contracts such as land rights or bank agreements can be structured upon Ethereum and then fueled by Ether. Think of Bitcoin as gold, and Ether as oil. Imagine all the emerging markets that could use Ethereum to solve land rights issues or even start forcing corrupt officials a dose of transparency!
3. Synergy. Whereas other coins may see a stagnated value because of lack of decentralized applications, (read: Places to use the money) Ethereum has already seen a HUGE network of decentralized applications come into existence. This means that those who invest into Ether will actually have an already developed network of applications to apply their investment. Every time a new application or system is developed on top of Ethereum, the whole group benefits from the synergy of the structure.
Cons:
1. Higher inflation than Bitcoin coupled with a more technologically advanced platform makes for a high barrier to entry. This isn’t as big of a concern if you’re looking to just trade ether, but is something that should be considered when balancing risk and evaluating the longevity of the system.
2. Whereas Bitcoin has been ruled as not subject to the VAT in the EU, this may not be the case for Ethereum. Ether is a fuel more so than it is a currency and as so the government my apply the Value Added Tax. VAT is at 23% currently so we may see some interesting dialogues erupt in the next year. This is something that has potential to very seriously affect the market for everyone.
3. Centrally controlled systems and public developers increase the potential risk of the coin for multiple reasons. Firstly, you have to consider that an individual with nefarious intentions now has a direction towards obtaining control of the keys to the system, and if that happens… it spells A LOT of problems for everyone else. Secondly, there’s a physical risk. What if someone with ill intentions finds a developer’s living quarters and threatens violence if insider information isn’t divulged? The creators of Bitcoin are still anonymous to this day and will probably stay anonymous for this exact reason.
In the end, despite the few risks we’ve listed, we feel pretty strongly that Ethereum is a system that will be around for awhile. Ether has tons of usage and potential beyond what has already been impressively applied. It feels cliche to say, but the initial scouting reports would tell us that the potential is limitless!
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