There’s a shiny new coin in town, and fascinatingly, you can’t touch it. We delve deep into the world of cryptocurrency to tell you all about Ethereum, the world’s latest virtual currency
What is Ethereum, a newly discovered element?
Ethereum sounds like a new addition to the periodic table, doesn’t it? But if you, like us, were thinking that that’s what it is, both of us could not be any farther away from the truth.
If you remember Bitcoin, you know what virtual currencies are all about. For those who don’t, virtual currencies are basically decentralised currencies that are bereft of regulation from central banks. They allow anonymous transactions between consumers and firms. And Ethereum is just one more of that. Joining the virtual gold rush that is already underway is the new game changer, Ethereum. It is a new form of virtual currency, which is wildly rivalling the world’s biggest best known cryptocurrency till now, Bitcoin. And this could not have come in at a better time. Bitcoin is being riven by internal divisions, and has struggled exponentially. Entering the virtual currency market at this time was an amazing move, if you ask us, because it has led to Ethereum soaring in value, climbing 1,000% over the last three months. Even beyond the price spike, Ethereum is fast attracting attention from finance and technology giants like JP Morgan Chase, Microsoft and IBM, who have described it as Bitcoin 2.0. For those of you who don’t know, Bitcoin was released in 2009 by a mysterious creator who used the alias of Satoshi Nakamoto. Ethereum, on the other hand, was created in a more transparent manner by a 21-year old Russian-Canadian, Vitalik Buterin. He created the new technology after he dropped out of Waterloo University in Ontario. Buterin raised $18 million in 2014 to fund the Ethereum Foundation through a presale of the software. The Ethereum Foundation basically focuses on supporting the software’s development.
Bitcoin V/S Ethereum
Due to the anonymity revolving around Bitcoin, the currency was widely used in shady transactions all over the world. Bitcoin’s image is definitely damaged due to the high interest of the black market, as trading of this currency is technically untraceable, which makes Bitcoins a very popular choice with hustlers and the black market. The fall of Mt. Gox, which was one of the world’s largest Bitcoin exchanges was further damaging to its image. These issues had slowed down Bitcoin transactions and were certainly the reason why some people were looking for alternative virtual currencies to support their businesses.
However, there are some similarities between the two currencies as well. The Ethereum system is also, like Bitcoin, built on a blockchain in which every transaction is recorded publicly. Such a system allows the exchange of money and assets more quickly and cheaply, when compared to relying on a long chain of middlemen. However, the catch that has enticed fans towards Ethereum is its provision of a way to create online markets and programmable transactions known as smart contracts, in addition to virtual currency.
Ethereum: The new shiny coin in town Ethereum is a decentralized platform that runs smart contracts, which are basically applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. These apps work on a custom built blockchain, which is an enormously powerful shared global infrastructure that can shift value around and represent the ownership of property. Developers are enabled create markets, store registries of debts or promises, along with many other things that have not even been invented yet, and all of this is done without a middle man or the risk of a counterparty.
Ethereum recently released its first full public software version, but it is possible for the system to face some of the same technical and legal problems that have stained Bitcoin. A lot of Bitcoin advocates believe that Ethereum will probably face more security problems than Bitcoin, because the system is far more complex than that of Bitcoin. However, Ethereum has faced much less testing, and far fewer attacks than Bitcoin till now.
Dozens of functioning application have already been built on Ethereum, which are enabling new ways to manage and pay for electricity, sports and bets. However, Ethereum is not wrought of problems. There is a strong suspicion around the novel design of the new cryptocurrency. This may lead to intense scrutiny by the authorities, as potentially fraudulent contracts, like ponzi schemes, can be fed directly into the Ethereum system.
The system has definitely required the authorities to be on alert, but its sophisticated capabilities have also made the system to be fascinating to executives, especially in corporate America. While IBM has been experimenting with Ethereum as a way to control real world objects in the Internet of Things, Microsoft has also started working on a number of projects that are easing the use of Ethereum on Azure, Microsoft’s computing cloud.
An Ethereum Future
The 2014 crowdfunded project has been taking over the world of cryptocurrency since its inception, and fast. Along with facilitating for a revolutionary new decentralised system for currency, Ethereum has also brought along with it a number of ways to make using it easier. The Ethereum Wallet, for instance, is a gateway to decentralized applications on the Ethereum blockchain. It allows you to hold and secure ether and other cryptoassets built on Ethereum, as well as write, deploy and use smart contracts.
You can also design and issue your own cryptocurrency with Solidity, a new language for smart contracts.
You can create a tradeable digital token that can be used as a currency, a representation of an asset, a virtual share, and a proof of membership or anything at all. These tokens use a standard coin API, so your contract will be automatically compatible with any wallet, other contract or exchange also using this standard. The total amount of tokens in circulation can be set to a simple fixed amount or fluctuate based on any programmed ruleset. If you already have ideas that you want to develop on Ethereum, and need funds to bring them to life, you can set up a trustless crowdsale to kickstart your dreams. Using Ethereum, you can create a contract that will hold a contributor’s money until any given date or goal is reached. Depending on the outcome, the funds will either be released to the project owners or safely returned back to the contributors. All of this is possible without requiring a centralized arbitrator, clearing house or having to trust anyone. You can even use the token you created earlier to keep track of the distribution of rewards.
So what happens once you’ve developed your idea and secured your funds? The process that follows usually requires hiring of managers and a trustworthy CFO who will handle the accounts, run board meetings and basically, do the paperwork. Ethereum has come out with a way to ease this process for you as well. You can just leave all of it up on your Ethereum contract. It will collect proposals from your backers and submit them through a completely transparent voting process. One of the many advantages of having a robot run your organisation is that it is immune to any outside influence, as it’s guaranteed to execute only what it was programmed to. And because the Ethereum network is decentralized, you’ll be able to provide services with a 100% uptime guarantee. Now doesn’t that sound like a future you could totally see yourself being a part of?
