What is Ethereum (ETH)? — ‘Smart Way to Do Business’ — Beginner’s Guide
The founder of Ethereum is Vitalik Buterin, born in Russia in 1994 and moved with his parents to Canada when he was 6.
A gifted student in school, he discovered an ability to add 3-digit numbers in his head twice as fast as the other students in his class, giving him an insight into his being drawn to mathematics, programming, and economics.
Buterin learned about Bitcoin when he was 19 when his father (a computer scientist) told him about the new technology. After indulging in the world of cryptocurrencies, he decided to develop his own smart contracting system — eventually leading him to win the Peter Thiel fellowship and calling the new system Ethereum.
Whilst much of the cryptocurrency world is shrouded in mystery, Vitalik has been relatively candid about Ethereum. He has stated on a number of occasions that it is waiting for a “killer app” to be developed on the platform.
Since the system is open-sourced, and therefore available for anybody to contribute to the code, a myriad of developers from around the world have created new features and fixed bugs in the system. To this end, there are a large number of people with both an emotive and financial commitment to the project.
The Ethereum value proposition is different from the majority of other coins (which basically just wanted to cash in on Bitcoin’s popularity).
According to its white paper, the Ethereum currency was developed as “an alternative protocol for building decentralized applications”.
In other words, it wasn’t developed to rival the USD, etc (as some people have mistakenly attributed to Bitcoin) — it was designed to provide developers & end-users with a decentralized system on top of which they would be able to create & ratify specific use-cases (such as only allowing rental usage for a particular amount of time, or to agree on contracts that have henceforth been ignored due to inconvenience)…
Satoshi Nakamoto’s development of Bitcoin in 2008–2009 has often been hailed as a radical development in money and currency, being the first example of a digital asset which simultaneously has no backing or intrinsic value and no centralized issuer or controller.
However, another, arguably more important, part of the Bitcoin experiment is the underlying blockchain technology as a tool of distributed consensus, and attention is rapidly starting to shift to this other aspect of Bitcoin.
…. what Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create “contracts” that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code.
You can read the full Whitepaper here.
The most important element here is the idea that Ethereum has been created as a platform to ratify contracts. This is significantly different to the myriad of other coins because it’s therefore not a transaction on its own that’s the determinant of the outcome, but the idea that certain pieces of logic need to be in place in order for the block to be processed.
Thus, when you consider the scope of Bitcoin’s infrastructure layer (IE giving the world the ability to transact without any central processor), and Ethereum’s ability to create logic-driven transactions, you begin to see that you could have a large number of time, or outcome-based contracts forming.
For example, you’d be able to pay your rent completely through the Ethereum system — unlike Bitcoin which doesn’t have any sort of timed mechanism or recurring model, the Ethereum system would give you the ability to pre-program the logic required to calculate the various rental prices and agreements for the tenants without needing any sort of central processor.
The implication here is that if the system was set up correctly, a landlord would not need ANY sort of involvement with the rent collection process. All banking and transactional systems would be handled entirely by the Ethereum infrastructure.
Obviously, we’re quite a way off from when this type of thing would be adopted en masse (there still needs to be a company like Microsoft who needs to come and popularize a central platform to make it work). Nonetheless, the underlying ideal behind the likes of Ethereum is actually intriguing.
As with Bitcoin, the price of Ethereum is pretty much dependent on the hype surrounding the cryptocurrency.
The most important thing to explain about Ethereum is that its adoption (as observed through its ever-growing transaction numbers) showcases the way in which the wider market has taken on its idea, and thus the ideas presented by many of the altcoins.
Most importantly, when you consider the crypto landscape, the underlying reality is that in order to make the system worthwhile, it needs adoption. Adoption — for a technology like this — comes from having a trustworthy and killer app that is able to provide users with the ability to harness the underlying technology without even having to think about it.
The likes of eBay, Amazon, Facebook, Google, Microsoft and more would be considered killer apps — what they built with the available technology drew millions of people to the respective solutions they made. As such, the interesting metric is the same with Ethereum.
The transaction graph for the coin has been growing steadily, with different levels of intensity, since its introduction in 2014. To date (Q4 2019), it has processed almost 600 million transactions, which are also free of many of the problems that Bitcoin suffers from — namely the difficulty problem as well as not having a limit on the size of blocks that can be added to its chain.
As such, the future (technologically) looks as bright for Ethereum as it is for Bitcoin… which is to say their fates are intertwined. As we’ve written before — it would just take a regulatory body to block their exchanges, or some other issue, to derail their trains permanently.
With this in mind, making a financial decision based on its technological prowess is not recommended.
Published at Wed, 11 Dec 2019 22:00:21 +0000
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