Ethereum The Versatile Asset
A look into Ethereum, now one of the most utilized cryptocurrencies.
Ethereum, currently the second-largest cryptocurrency, is an open-source public service that implements blockchain technology. Ethereum uses the blockchain to facilitate smart contracts.
Smart contracts are supported by the decentralized blockchain and encrypted to be used on the blockchain. Ethereum has two main uses, external accounts, and contract accounts. Developers can pair these accounts with their own technology to develop new systems. Ethereum is being implemented in many banks, insurance companies as well as app-development to streamline internal processes.
Smart contracts can:
- Function as ‘multi-signature’ accounts, so that funds are spent only when a required percentage of people agree.
- Manage agreements between users, say, if one buys insurance from the other.
- Provide utility to other contracts (similar to how a software library works).
- Store information about an application, such as domain registration information or membership records.
History
Ethereum was officially created in 2013 by Vitalik Buterin. But the history behind it is a little more interesting. Initially, Buterin was introduced to blockchain technology when he became the co-founder of the Bitcoin Magazine. This leads him to consider the application of a tool that went beyond the financial use cases allowed by Bitcoin. Buterin said,
“I thought those in the Bitcoin community weren’t approaching the problem in the right way. I thought they were going after individual applications; they were trying to kind of explicitly support each in a sort of Swiss Army knife protocol.”
The white paper was released in 2013 and this describes what would become the second-largest cryptocurrency in the world; Ethereum. The key difference from Bitcoin was Ethereum’s ability to trade much more than just cryptocurrency.
Buterin and other co-founders of Ethereum launched a crowdfunding campaign in 2014. They sold participants Ethereum tokens to raise more than $18 million. Ethereum was officially released in 2015. Since then the platform has grown rapidly, with hundreds of developers involved.
Ultimately, Buterin hopes Ethereum will be the solution for all use cases of blockchain that don’t have a specialized system to turn too.
How Is Ethereum Different To Bitcoin?
Ethereum and Bitcoin do share many similarities, however, there are some differences in which you can differentiate the two.
Bitcoin trades in cryptocurrency, while Ethereum offers several methods of exchange, including cryptocurrency (Ethereum’s is called Ether), smart contracts and the Ethereum Virtual Machine (EVM).
They are based on different security protocols: Ethereum uses a “proof of stake” system as opposed to the “proof of work” system used by Bitcoin.
Bitcoin allows only public (permissionless or censor-proof) transactions to take place; Ethereum allows both permissioned and permissionless transactions.
The average block time for Ethereum is significantly less than Bitcoin’s: 12 seconds versus 10 minutes. This translates into more block confirmations, which allows Ethereum’s miners to complete more blocks and receive more Ether.
It is estimated that by 2021 only half of the Ether coins will be mined (a supply of more than 90 million tokens), but the majority of Bitcoins already have been mined (its supply is capped at 21 million).
For Bitcoin, the computers (called miners) running the platform and verifying the transactions receive rewards. Basically, the first computer that solves each new block gets Bitcoins (or a fraction of one) as a reward. Ethereum does not offer block rewards and instead allows miners to take a transaction fee.
Why Ethereum Is So Successful?
Ethereum has solved many problems since its inception in 2015. It allows individuals and companies to do much more than just transfer money between entities.
Ethereum is still the most popular utility used by developers as it was the first of its kind. This gives it a great head start against other projects. Furthermore, Ethereum has one of the strongest B2B communities supporting it.
Ethereum In Current Times
Ethereum is being used as large investors and governments are now looking at blockchain technology with a keen eye. The National Research Council of Canada (NRC) announced Monday that it has built an Ethereum blockchain explorer. Using Ethereum for a web application. Furthermore, Moscow’s government is planning to use Ethereum as part of a system for allotting trading spots during weekend farmers' markets.
The system will record applications submitted by farmers, creating greater efficiency. Another example is the government of Brazil announced its intention to move petitions and popular voting onto Ethereum. Finally, Chile uses Ethereum to track the data and finances from the energy grid, hoping to combat corruption and exploitation through transparent, immutable data available for every citizen to see. These exampled show how the governments around the world are looking at blockchain technology to improve services, secure transactions, and enhance security and trust. This trend is growing and is showing a great deal of attention from agencies around the world, both national and local.
Summary
The price of Ethereum reached over $1,400 in January of 2018, it has since diminished to below the $200 area. This extreme volatility attracts many investors but also turns many cautious investors away. The demand for Ethereum is set to grow as more institutions and governments implement the technology, but are there better alternatives to replace the use case of Ethereum?
Share your thoughts, do you think Ethereum will be successful?
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Author: Jamal Hasan
