Why are big companies investing in Ethereum?

While mainstream media headlines continue to focus mainly on Bitcoin, the blockchain platform Ethereum is gathering serious momentum. Huge entities ranging from banks such as JP Morgan and Credit Suisse to tech giants Microsoft and Samsung are putting considerable resources into making sure Ethereum is a success.

Bitcoin v Ethereum

Unlike Bitcoin, Ethereum isn’t intended to be purely a cryptocurrency. It allows for smart contracts which automatically process transactions when both parties involved have fulfilled their ends of a deal. Transactions on the Ethereum platform are powered by its native cryptocurrency, Ether. Like Bitcoin, Ether can be bought and sold for hard currency through a variety of online exchanges. Ether consistently trades for a lot less than Bitcoin, but with the support of major companies and banking institutions, its value might be set to skyrocket shortly.

The Enterprise Ethereum Alliance

One of the biggest entities supporting the growth of Ethereum is the Enterprise Ethereum Alliance. This alliance has been created in order to bring together huge banking and technology firms to develop innovative new uses for Ethereum and the blockchain technology on which it’s based.

Along with a variety of cutting-edge start-ups, the tech companies most heavily involved in the Enterprise Ethereum Alliance are Microsoft, Intel, and Samsung. The hi-tech acumen of these companies get support from the immense financial resources and knowledge of institutions such as JP Morgan, ING, Santander, Mastercard, and numerous other big hitters.

The main goal of the partnership is to make Ethereum more accessible and practical for a wide range of real-world applications. The companies within the alliance are engaged in initiatives that look to help this blockchain platform and cryptocurrency realize its world-changing potential.

Microsoft

Microsoft built its reputation on the Windows operating software. The genius of Windows was that it made the task of interacting with a computer intuitive, replacing text-based command-line interfaces with a point-and-click desktop full of colorful icons. Microsoft is now hoping to have a similar effect on the way businesses use Ethereum.

The main drawback of blockchain technology at the moment is the complexity of using it. While most people can understand the principle on which cryptocurrencies like Bitcoin operate, using these technologies to their full potential is another matter. To overcome this problem, Microsoft is in the process of developing what it calls the Confidential Consortium Framework, or Coco for short.

Because of the way in which blockchain technology allows for real time updates or electronic records of transactions, it has massive potential to revolutionize the way almost every type of business operates. For example, a major retailer can use blockchain technology to maintain a flexible and highly functional database of stock movements from warehouses to the stores where customers buy the items.

Private blockchain ledgers can be compared to the intranets many companies operate (private computer networks with closed access). Open public blockchain ledgers such as Ethereum and Bitcoin are analogous to the internet. What Microsoft hopes to do with Coco is to bridge the gap between these public and private blockchain ledgers and make it possible for businesses to interact with each other and make transactions across the ledger, thus creating a wider interconnected blockchain that has as much disruptive potential as the development of the internet.

Samsung

South Korea is one of the world’s most forward-looking countries, noted for its hyper-fast internet and substantial investment in cutting-edge technologies such as robotics. It has also embraced cryptocurrency on an incredible scale, being the third-largest Bitcoin market in the world and home to three of the five largest Ethereum exchanges, collectively responsible for as much as 40% of the global trade in Ether. These figures become even more impressive when you consider that the country only has a population of around 50 million people.

Samsung is responsible for around 17% of South Korea’s GDP. While it’s best known overseas for consumer electronics, Samsung offers a dizzying array of products and services within South Korea, from cars and shipping freighters to insurance.

Samsung Data Systems is a subsidiary of the conglomerate that has joined the Enterprise Ethereum Alliance and is looking at developing new uses for Ethereum’s blockchain technology about another hi-tech Korean obsession, e-sports.

E-gaming is a profitable business in South Korea, with internet cafes offering high-spec gaming PCs and TV channels dedicated purely to broadcasting games such as Starcraft and League of Legends. Despite its centrality in so many other areas of South Korea’s economy, Samsung is at present a minor player in the gaming sphere, so they are hoping to use blockchain technology to change that.

Samsung Data Systems’ stated aim is to use Ethereum as a platform for allowing the easy transfer of cash prizes for online gaming contests. Ethereum would allow winnings to be transferred quickly and seamlessly while also adding a level of trust and protection to high-stakes gaming battles.

Banking Institutions

There’s a simple explanation for the huge number of banking institutions throwing their weight behind the Ethereum Enterprise Alliance.

Firstly, banks and financial institutions have seen the impact of disruptive new technologies on industries such as newspapers, cable television and record labels. Hence why they’re now getting on board with fin-tech.

Secondly, these financial institutions already have an advanced working knowledge of the types of transactions that platforms such as Ethereum are developed to facilitate. For those who want to see cryptocurrencies, smart contracts, and other blockchain-enabled technology thrive, there is no better ally available than these.

Thirdly, most of these financial institutions exist with the purpose of making money, and few investment opportunities have yielded such incredible returns as quickly as cryptocurrency. The skyrocketing of Bitcoin’s value attracted huge interest in cryptocurrencies. Ethereum’s rise has been less meteoric but still spectacular compared to almost any other form of investment.

So Is Ethereum a good investment?

The final point to consider is what this all means for smaller businesses and individual investors. Ethereum and other cryptocurrencies have offered incredible returns, but they have also seen their prices dip and crash almost as regularly as they swing upwards.

Cryptocurrencies are an incredibly volatile investment, and they’re not for the risk-averse.

The fundamental difference between small-scale investors and huge enterprises such as JP Morgan is that the bigger institutions can afford to take a lot more risks. It’s interesting to note that in South Korea, which is almost certainly the largest per capita investor in Ethereum, the bulk of interest and investment has come from already-wealthy individuals investing sums worth an equivalent of $100,000 or more.

The backing of big tech companies and financial firms is a huge help for Ethereum, and it may well help this blockchain platform and its associated cryptocurrency thrive long into the future.