Profiling the Elevatyr Core 12: How Ethereum is Building a New World
Visit https://www.elevatyr.io/ to sign up for the closed beta waitlist, and to learn more about how Elevatyr is the simplest way to intelligently trade cryptocurrencies.
Ethereum, at its core is a tool. One of the most advanced tools humans have ever created, but a tool nonetheless.
Tools are interesting because when you make one, you’re not just building something for others to use, you’re building something for others so that they can also build new things. The repercussions of your creation stem much further and have the power to revolutionize existing industries and even create new ones.
In 2013, a 17-year-old Vitalik Buterin published the whitepaper for what we know today as Ethereum, and perhaps unknowingly set off a whirlwind of innovation in the blockchain industry.
Of the top 100 coins by market cap as of publishing, 94 are built on the Ethereum platform.
Ethereum gives developers the freedom to build an ecosystem of decentralized applications (Dapps), provides a platform for funding, and uses financial incentives to manage its operations.
The Ecosystem
The most dramatic difference between Bitcoin and Ethereum is their technologically capability. Bitcoin is simply one iteration of a peer-to-peer digital cash on a decentralized immutable ledger. It has a predefined set of operations that you can interact with, all which involve the basics of making transactions.
Using Ethereum’s proprietary language Solidity, and the Ethereum Virtual Machine (EVM), which compiles the Solidity code into 1’s and 0’s, developers are now able to design smart contracts that can be trusted to automatically execute based on any number of stimuli. Smart contracts may not seem like a revolutionary idea, as they are at their core just a digital version of regular contracts. But like Ethereum itself, smart contracts are a tool that can empower incredible results.
On their own, you and I and could set up a smart contract where I’d send you 1 ETH for liking or “clapping” this article. You could’ve clapped and then I could’ve sent the money, but then we’d have to trust each other to both fulfill our agreed roles.
Ethereum provides a platform where we can always trust that contracts will execute once they are “signed”, and while these contracts might be simple for our example, developers can use this tool to write layers of smart contracts to design an any number of blockchain projects. In theory, we can run the world’s economy through a network of smart contracts.
ICOs
The ICO space may seem full of scams and unsavory behavior, but you’ll see that anywhere there is the promise of money to be made with little effort.
Critics often use the state of ICO space along with the speculative nature of those who trade digital assets as a way to discredit the technology and those who use it. The issue here is simple, people are resistant to change, especially when things aren’t perfect yet.
When the light bulb was invented people thought it would be useless because it was the first iteration of a light bulb. It was expensive, short-lived, fragile, and seemed like a novelty to people who knew nothing beyond a world of lanterns. The same goes for the first cars, computers, and now blockchain.
We now have light bulbs that last thousands of hours, electric cars that go 0–60 in under 2 seconds, and a global network of computers that has produced and recorded the more data in the past hour as was recorded in the first 10,000 years of humanity. Each of these inventions took decades of innovation to reach a level where it was optimal for an entire population to use it.
At its most simple level, the ICO space is a market where companies and organizations can sell cryptocurrency tokens to Ethereum holders who believe in their idea in order crowd fund the necessary money to create their product. Instead of looking door-to-door for investors in Silicon Valley or trying to secure a loan from a bank, you can use the internet as a platform and blockchain as a tool to reach far more people and raise the capital you need.
Furthermore, along with serving as a fundraising method, these tokens are often designed to work within the company’s ecosystem. When a token has a functional use with a company’s product, it is known as a utility token, and separates the cryptocurrency from those considered to be security tokens, which only exist as an investment vehicle.
As the technology advances, not only will it bring new developers to make great products along with it, but regulation and new interest will bring a sense of order and safety to what is now the wild west of crypto, but has the potential to be the technology upon which we build an entire economy.
Incentives
The design of Ethereum takes into account the economic principle of incentives. In economics this principle says that people in general act irrationally, but they react rationally to incentives.
Let’s use government tariffs as an example. In early 2018, the United States and China announced a series of increasingly punitive retaliatory tariffs. The tariffs, if put into effect, would levy a significant tax on a variety of good when imported from the opposing country.
In theory, this financially incentivizes foreign manufactures to move to the US so they can charge the same price for products and have a higher demand, US businesses to buy from domestic manufacturers because its cheaper, and US citizens to buy products manufactured domestically because they’re cheaper, all departures from consumer behavior in the previous status quo.
Incentives drive behavior.
The Ethereum network uses financial incentives to guide and protect its community through various programs, such as fees, staking, and airdrops.
Due to Ethereum’s relatively smaller block size to Bitcoin, fewer transactions can be executed per block. This, in turn leads to an increased number blocks need to be validated to administer the same number of transactions. This opens Ethereum to attacks whereby an individual or a group of coordinating actors in the network can clog the system, thereby slowing down transaction times for everyone. Ethereum’s transaction fees, known as Gas, serve as protection against such an attack. Transaction fees are based on how busy the network is, so attempting such an attack becomes too expensive for it to be truly viable.
Gas also plays a role in Ethereum’s ecosystem as a reward for key participants, such as those who participate in staking. Staking refers to network participants who store their Ethereum tokens in a specific type of wallet that simultaneously tracks the status of blockchain, thus reducing the user’s strain on the network. These individuals are rewarded with small infusions of Gas as means to incentivize their continued behavior, which creates benefits for other participants in the less burdened network.
The same goes for airdrops. As more ICOs are launched, there’s been more in the first quarter of 2018 than all of 2017, Ether holders will be rewarded with free tokens given to them by the projects who run their projects on the platform. Airdrops are a common marketing technique for companies with new ICOs as a means to drive adoption of their token, and overall product.
Ethereum continues to demonstrate incredible potential to serve as the foundation for the next generation of key technology and platform architecture. Its design, meant to drive ideal user behavior by incentivizing network participants at every turn powers every Dapp and related blockchain built on top of its core systems.
Ethereum can be traded on select cryptocurrency exchanges, and will be available for trading via Elevatyr, which will be entering an early access period in July. Visit https://www.elevatyr.io/ to sign up for the closed beta waitlist, and to learn more about how Elevatyr is the simplest way to intelligently trade cryptocurrencies.
For those interested in learning more about Ethereum, you may visit Ethereum’s website at https://ethereum.org/
Disclosure: This article does not represent an endorsement of the Ethereum cryptocurrency as an investment, and is for informational purposes only. Trading decisions should be made on an individual basis, and be informed by independent research. Elevatyr makes no recommendation as to trading behavior that should or should not be taken. The author of this article owns a small stake of Ethereum cryptocurrency.
