Ethereum. How the Internet will be
In the aftermath of the explosion of cryptocurrency Ethereum (from $65 to $100, then $150 and higher), I feel the urge of sharing my thoughts and trying to make sense of what is happening.
Despite the amount of hours spent researching, programming and evaluating the blockchain world, this post is my personal opinion and should not be considered as a suggestion to buy/sell cryptocurrencies nor as a financial analysis.
It is undeniable that Bitcoin has dominated the world of cryptocurrencies since 2013, when it exploded after reaching 100$ to skyrocket towards 1000$ in a matter of days.
Turns out that this might happen again. Unfortunately.
This would be unfortunate due to the fact that in Ethereum there are all the requirements to skyrocket way higher than 1000$. In this post, I will explain why Ethereum is more valuable than the concept of fiat currency.
I will also explain why the traditional way of thinking about blockchain, technology, and the Internet is obsolete. Defining Ethereum as another cryptocurrency can be misleading. Ethereum can change everything.
Ethereum is a platform that can execute code on the blockchain, without any downtime, fraud, or outside interference. The essence of the Ethereum platform is embedded in the concept of Smart Contract, the real code that is executed in a decentralised fashion.
To make a comparison with its old cousin Bitcoin, the simple capability of writing a payment transaction such as Alice pays Bob 1 BTC can be easily extended to the more complicated transaction Alice pays Bob 1 BTC if Bob’s wallet is 10% lower than yesterday. In Bitcoin, a certain amount can get payed or transferred if there is enough balance in the source wallet. With Ethereum many other conditions can be applied, making the application richer and more useful for an enormous amount of real-world scenarios.
As a matter of fact, the possibility to encode conditions together with code execution (on the blockchain) is something that everybody was looking for since Bitcoin was created.
To better understand this concept, let me quickly explain how the CPU works. In Computer Science there is a limited set of instructions that is recurrent in practically any program that one can execute on a CPU (Central Processing Unit). This particular set of instructions gives a system
- the ability to create, read and write variables (of any type, eg. char, string, arrays, numeric, int, float, etc.)
- the ability to simulate moving the read/write head
- the ability to simulate a finite state machine (FSM)
- a HALT state
In two words, Turing Completeness, the property of a system to execute any program (also called computationally universal system). Such theory was invented by Alan Turing under the name of Universal Virtual Machine.
Having said that it turns out that Ethereum is a Turing Complete Platform. Well, almost. It would be fully Turing complete only if a program could execute for a limited but indefinite amount of time — which is currently not possible because of energy constraints. Basically, every instruction requires an amount of gas to execute on the Ethereum platform. This gas is usually payed by the owner of the code for his software to be executed. Needless to say that an application out of gas will stop working.
This energy/gas constraint is what makes Ethereum sustainable. To the purists, it makes Ethereum not fully Turing complete. However, the gas mechanism is essential to guarantee incentive and the entire functioning of the Ethereum Virtual Machine in a decentralised yet secure way on the blockchain. In addition to that, the memory depth of the Ethereum Virtual Machine is limited for security reasons.
As a matter of fact the Turing complete Ethereum Virtual Machine can execute any program, with the same sophisticated logic of traditional computing. The only difference is that execution occurs… on the blockchain. This opens the door to a plethora of new possibilities the Bitcoin community has been dreaming about for years. In comparison the Bitcoin platform looks very limited. And it really is much more limited with respect to the infinite possibilities offered by the Ethereum platform.
What can be run on Ethereum?
Turing completeness immediately translates into anything. For the sake of clarifying what anything means let me roll down some possibilities.
Given that the code of the smart contract needs to be replayed from the genesis block, it must be deterministic. This means that there cannot be any random value during execution. A general application can deal with random values of course. While being a limitation for Ethereum, the Turing completeness still allows complex logic to be handled.
Generally speaking most of the applications we are using today can have its distributed equivalent, also called Dapp.
Guess what an application called WhatsDapp might do? In such a Dapp a message from Alice to Bob would just duplicate among many individual computers, until destination, Bob’s computer. All the computers between Alice and Bob are basically making the transfer possible, allocating their resources, network, memory, computing power, in exchange for money or Ether, the currency of the Ethereum Platform. Needless to say, end-to-end encryption would be possible too.
When complex logic is possible, one can write a Dapp to manage, exchange, create identities without an institution, a piece of art without galleries, a book, an article or music without agencies or editors, a social network without Facebook, a Uber service without Uber, and the list can go on pretty much indefinitely.
The video game industry and online ticketing systems are other domains where Ethereum would just do great.
An online email platform on Ethereum would definitely put an end to spam and illegal/intrusive advertising, if sending an email costed gas.
Online voting and decentralised governance can finally be secure, trustworthy and impossible to tamper with on Ethereum.
Finance would be completely disrupted and rewired from scratch, diluting and redistributing power and wealth. All financial products and services that go beyond the simple transaction can be greatly served on the Ethereum platform without banks. This includes hedging contracts, sub-currencies, financial derivatives, savings wallets, wills, and definitely some classes of full-scale employment contracts. Semi-financial applications, where monetary and non-monetary components co-exist in the same transaction are also straightforward. As an example, exchanging money for non-monetary services, like storage, computation, or renting in general.
With this said, people around the world are misunderstanding Ethereum, confusing it for a currency a la Bitcoin, volatile enough to give joyful moments whenever one cashes out in USD/EUR.
Ethereum is nothing like that.
With Ethereum, it is not a matter of how many USD will it be exchanged at a certain day of the year.
Ethereum represents the value of the infrastructure that it leverages to perform operations in the Internet of the future.
This is what makes Ethereum priceless.
Despite the speculative opportunity of Ethereum for many, it is undeniable that some organisations finally realised the potential benefits and disruption of such technology. The member list of the Enterprise Ethereum Alliance represents one of the many signs that a technology like this one cannot be ignored and will change the way we do anything that requires the smallest amount of technology. Large corporations have joined already. Among the most prominent ones, BBVA, J.P. Morgan, ING, Microsoft, Intel Santander, Monax, Credit Suisse, UBS, Accenture, Toyota, Thomson Reuters, and the list goes on as published here.
These organisations realised that the entire internet ecosystem can be disrupted by Ethereum and its Dapps that will need no intermediary to execute without fraud nor service interruption and interference. For the members of the Ethereum Alliance it is mandatory to join the blockchain not to miss the train of opportunities and stay isolated in the old good Internet 1.0.
All the members of the Enterprise Ethereum Alliance know that owning Ethereum means owning a piece of the TCP/IP Internet stack of the future.
Do you see Ethereum merely as a cryptocurrency now?
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