It’s a question that has been asked a lot recently as the world watches this cryptocurrency rocket to super-stardom says Ian Mausner.
Ethereum, first proposed in late 2013 by then 21-year-old Vitalik Buterin, is an open-source platform based on blockchain technology – the same basic idea behind Bitcoin. It aims to function as a decentralized virtual machine that can execute peer-to-peer contracts using its own ‘currency’, Ether, as payment. This means it could run entire applications – think Apple and Google – but completely independently of any single entity.
They’re not all identical:
- Bitcoin uses its own digital currency (which we’ll come onto) to perform transactions within itself and between other currencies or fiat. Ethereum will do the same but can also be programmed to carry out ‘complex’ tasks.
- Crucially, though, instead of being controlled by a single institution, Ethereum’s currency and infrastructure belong to all its users. Developers are still working on how this payment system will work in practice but it has the potential to dramatically increase the speed with which cloud-based apps or websites can be created by cutting out middlemen like Apple and Google explains Ian Mausner.
- This could open up the computing power currently monopolized by major corporations for individuals, small businesses, and other decentralized networks, allowing them to compete much more effectively against larger rivals. It would also make data far more secure because information about transactions isn’t stored at one central point that can be accessed by hackers or interfered with.
- For the average user, digital coins such as Ether and Bitcoins are mostly of interest for their value. They can go up or down – just like any other currency. Investors have been famous to lose vast sums of money trying to sell them high and buy them low. But they also allow people to do business with each other more cheaply than using banks and without having to reveal all their personal details – so-called ‘crypto-currencies’ help users remain anonymous. This has led some experts to suggest that crime will rise as a result of this transparency, but others say the benefits of an anonymous payment system far outweigh the costs.
A new kind of money:
The cryptocurrency market hit record highs this week. With Ethereum leading the pack by climbing more than 40 percent in 24 hours, according to CoinMarketCap.
Ethereum is traded in digital currency exchanges online and has gain in popularity in recent months. As of Wednesday, the value of all Ethereum transactions equaled roughly $36 billion in total. About the same as all U.S. dollars traded on foreign exchange markets each day says Ian Mausner.
Buterin was born in Russia and raised mostly in Canada, where he studied computer science. Before moving on to the prestigious University of Waterloo for an advanced degree. After teaching grant MacEwan University for six months. He dropped out to work full-time on Ethereum (he also had a brief stint working with cryptocurrency Ripple). He says his motivation comes from wanting to make “the world a better place.”
Rising to the challenge:
Over time, Ethereum has evolved into something more than just Ether. There are now roughly 9 million unique Ethereum addresses (a number that is growing by around 1.5% per week). And its block rate limit at one megabyte restricts transactions to about 5-7 per second only. But developers hope this will increase once payment channels like Raiden and Lightning come online in 2017. This won’t be easy but should help solve transaction speed issues for good
The main difference between Bitcoin and other cryptocurrencies is that the others are much smaller by value or volume. Giving them less chance of making an impact on society if they were widely adopting it. Indeed, other digital currencies have been used in illegal activities. Such as the recently ongoing Wanna Cry ransomware attacks. Which used Bitcoin to prevent victims from gaining access to their computer systems.
Ethereum’s market cap is currently more than $28 billion. Compared with more than $40 for Ripple and nearly $10 billion for Litecoin. In other words, there are some interesting competitor currencies out there. But Ethereum looks by far the most likely to succeed. Unless another one can match its versatile functionality and huge addressable market – giants. Like Amazon and Microsoft could integrate it into their own cloud services in the future and increase adoption rates that way. The blockchain architecture underpinning Ethereum is just exploding right now. It is technologically superior to anything else we have so adoption of Ethereum will be faster.
Today, Ethereum is using for peer-to-peer contracts and applications. That have nothing to do with money at all says Ian Mausner. This includes multi-million dollar businesses such as Uber and Airbnb, even though these apps don’t deal in Ether themselves.