Ethereum & Ethos: A Tale of Two Cryptocurrencies
Understanding Ethereum is key to understanding Ethos. If Bitcoin is “digital gold”, i.e. a secure, decentralized and universal store of value that can appreciate or depreciate then Ethereum is digital oil — a commodity that powers an ecosystem.
Ethereum was one of the original and first token offerings, now commonly referred to as an “ICO” although at the time many referred to it as the “Ethereum IPO”. In the original Ethereum offering, people who supported the original vision of what Ethereum wanted to develop, showed their support for the project by pre-purchasing the unreleased product with Ether tokens at a price of approximately 2000 Ether per Bitcoin. As Bitcoin at the time traded for approximately $500, each Ether was roughly $.04 each. Using the proceeds from the offering, the Ethereum foundation built the Ethereum Virtual Machine (EVM), a decentralized global virtual supercomputer that eventually used Ether as the gas to execute smart contracts.
The Ethos Ecosystem
If Ethereum is oil then Ethos is the engine. Ethos is a technology platform that uses the Ethereum Virtual Machine (EVM) along with battle-tested industry standards such as BIP32 and BIP39, as well as new standards such as ETHOS-44. The ultimate objective is to create a cryptocurrency financial ecosystem that is designed to benefit consumers, businesses and developers while protecting the overall safety and soundness of this open system by remaining committed to market based rules, such as KYC & AML, and adopting a regulatory friendly structure to prevent bad actors from participating.
The Ethos Mission
The mission of Ethos is to democratize cryptocurrency by enabling a safe and secure investment ecosystem covering crypto and traditional assets that eliminates costly and harmful frictions, and is open to consumers, financial institutions, developers and governments who wish to operate on the blockchain.
What does the ETHOS token do?
Similar to Ethereum, the ETHOS token is the “fuel” that powers the Ethos Ecosystem. This fuel powers a broad range of services including access to the Ethos API and many other services. For example, any developer can build applications that leverage Ethos wallets, keys or data in Bedrock by paying fractional ETHOS tokens for that application. ETHOS tokens reduce the cost for consumers, businesses and developers by enabling micropayments at very low cost to create a safe, secure and verified way for anybody to participate in the new economy.
Ethos is open to everyone. Community participation is key to the success and development of the Ethos Ecosystem. The community can get involved in open source development, become a part of the Ethos movement and even in the future provide valuable services to the Ethos Ecosystem. Ethos is about using the powers of the blockchain to rethink how a digital financial ecosystem should operate.
How does Ethos use the blockchain?
Parts of the Ethos platform operate on the blockchain and other parts don’t. This structure is due to the simple fact that there are certain things blockchains are good at doing (keeping track of assets, verification, high value data persistence) while there are other things (scalability, cost, data storage) that blockchains are not good at doing.
The mistake a lot of projects and organizations are making at the moment, especially with the large public appetite for ICOs, is most are trying to force anything they can into the blockchain when in reality the actual uses of blockchain are fairly narrow. That being said, although the current use cases of blockchain are currently narrow, they are in fact quite powerful and have the potential to fundamentally change entire financial ecosystems.
Ethos uses the blockchain in a number of ways. First Ethos keeps Nodes of all major coin transactions, and identifies which are “verified” transactions according to registration data held within the Ethos ecosystem. This data can then be accessible by verified stakeholders or interested parties through the Ethos API in exchange for ETHOS tokens.
Secondly, Ethos can further identify source of funds for certain blockchain transactions if those funds come into the ecosystem through an Ethos-partnered service such as a registered investment advisor, broker dealer, investment company, etc. Identifying KYC and AML’d funds and transactions enables Ethos to contribute to a safer and more secure blockchain.
Thirdly, scalable micropayment channels, or layer 2 scaling solutions, can be utilized on Ethereum involving ETHOS token transfers. This enables extremely cheap financial services for people around the globe who often have no access to financial services while also keeping the integrity of the system with verified source of funds on the blockchain.
Finally, smart contracts enable Ethos to build a new financial ecosystem that benefits consumers first. The Ethos Ecosystem also enables consumers to own, and benefit from, assets directly using the properties of provable ownership on the blockchain. While in the traditional economy, direct ownership of an asset is difficult or impossible in some cases, the blockchain allows advanced financial instruments to be owned and custodied by the individual, vastly democratizing access to a global financial ecosystem.
How the Ethos platform works
Broadly speaking, the Ethos platform has four major components
- The Ethos Universal Wallet: a self-custodied blockchain asset management architecture open to consumers, institutions and developers.
- Ethos Smart Keys: a single secure digital key solution that allows secure self-custody or custodial management of hundreds of different coins, tokens and currencies with a single key.
- Ethos Bedrock: a “Stripe for Crypto” processing and development platform that can run scalable applications, broadcast data and verify identity and source of funds on the blockchain.
- Ethos API: a way for financial institutions to seamlessly connect with financial institutions creating a new breed of FinTech applications.
What are the benefits of Ethos?
Ethos is designed to use existing standards within the cryptocurrency ecosystem, while adding functional benefits and additional standards to make it safe, secure and capable of integrating into the traditional financial ecosystem.
These include the following benefits:
- The Ethos Universal Wallet will include verified addresses to ensure there is a real person with a social profile behind every transaction securely stored on the blockchain. This practically means that before sending funds, a consumer will be able to know the history of a given address, and if it has been registered in the Ethos ecosystem or not.
- Ethos KYC / AML will enable verified source of funds and an extra level of security for wallets, addresses and accounts to combat money laundering and fraud. This will be a step up from a “verified” address.
- Ethos Premium Wallet addresses enable brands and individuals to officially register wallet handles, providing a safe identity, and a convenient email-like address for easier payments and a greatly reduced likelihood of error.
- Ethos transaction history will enable consumers and investment advisors to create tax-friendly transaction history, making it easier for consumers and businesses to properly manage and pay taxes.
- The Ethos Ecosystem provides a robust consumer and regulatory friendly experience that increases access to financial services, lowers cost to consumers and enables a people-powered movement towards a fair and open economy.
How Ethos fits in
Ethos is fundamentally changing an entire model by putting a few things on the blockchain. Asset management, pro-rated access and provable ownership are important ideas that blockchain allows you to rethink and rebuild. Blockchain enables a community powered, consumer-centric and regulatory friendly financial ecosystem to seamlessly operate with existing financial systems.
Crypto Kitties Stress-Testing Ethereum
An application that unexpectedly took the Ethereum virtual Supercomputer by storm is Cryptokitties, a way for users to buy tokenized pets that can be bred together to create new and distinct pets, kind of like a decentralized version of Tamagotchi. Some Crypto Kitties have sold for over 100 Ether, or over $100,000 USD given their unique and rare nature. Crypto Kitties should be viewed as something exciting since it is proof that Ethereum works and that the concept behind Ethereum really is as powerful as people say it is.
Crypto Kitties, however, also demonstrates the need for Ethereum to scale without the price of gwei (gas in the Ethereum system) going up too much when an application gets popular. There are a lot of Ethereum scaling proposals being considered right now by the Ethereum Foundation (Raiden, Plasma, PoS, Sharding) which should provide a lot of confidence in the Ethereum platform and its ability to scale. This is especially true when looking broadly at the blockchain space as current scaling proposals being considered by other chains are either non-existent or untenable. Ethereum is also the only widely adopted smart contracts platform with over 1 million smart contracts — each representing a Dapp or decentralized application.
Ethereum is clearly the platform of choice for an application like Ethos and we are excited for what we can build using this new, innovative technology.
Founder and CEO