Cryptocurrency Update: Ethereum 101
Unless you’ve been living under a rock for the last six months, you’ve probably noticed cryptocurrencies, ICOs, and blockchain technology dominating tech media headlines as of late. It’s no longer just a side-story, only of interest to the hacker crowd. Giant, industry-leading corporations have taken notice, and many (Microsoft & JP Morgan, just for starters) are taking some major steps to implement the technology into the cores of their respective businesses. And it’s not Bitcoin where these conglomerates are placing their bets, it’s Ethereum.
With a current YTD growth rate over 2000%, it seems that Ether is on track to surpass Bitcoin in market cap and value, however, the price of Ether (and most cryptocurrencies) has tumbled in two last weeks from a high of $380 down to around $260 at the current writing of this article, causing some doubt on its durability, and not news to the experts, showcasing its high volatility. However, the many use cases of this cryptocurrency make Ether more likely to stick in the long run, especially considering the fact that Bitcoin itself has seen MUCH larger swings in value over the course of it’s young lifespan, and has now seemed to “stabilize” roughly around $2500 per coin.
Bitcoin was the first cryptocurrency on the market. It was, and still is, the most well-known and sought-after digital token in existence. It will hold its place in history as the pioneer of the technology, and drove the concept of decentralized currency into the public eye. It has grown in value at unfathomable rates, and has forced government and financial institutions across the globe to start looking over their shoulders. However, Bitcoin is only a product of the blockchain technology, an asset. Bitcoin is only one of now hundreds, if not, thousands of individual currencies in circulation. But if Bitcoin has dominated the crypto space for so long, and is obviously BY FAR the most valuable currency out there, why are experts saying that Ethereum is the new alpha?
Let’s rewind to 2014…
Enter Vitalik Buterin, a nineteen-year-old Russian-born citizen residing in Canada, who brought Ethereum into existence through a delayed, but successful pre-sale, raising 3700 BTC ($2.3 million USD at the time of sale). Inspired by Bitcoin, Buterin built his blockchain platform with a trench coat-full of functionality that goes way beyond digitized financial transactions. He built a network where anyone can create applications that run on the decentralized Ethereum platform. Most notably, it provided the ability to create programmable transactions known as smart contracts.
But the possibilities are endless. Outside of smart contracts, Ethereum can be used for file storage, supply chain auditing, protection of intellectual property and identity management, land title registration and stock trading. One fast-growing use case for Ethereum is within the sharing economy, helping facilitate peer-to-peer payments. OpenBazaar, as one example, created a peer-to-peer EBay platform using cryptocurrencies, eliminating fees and restrictions.
Also helping push Ether up-and-to-the-right, is the recent uptick in ICOs (Initial Coin Offerings), which have become the new norm in fundraising for blockchain-based startups, preferred by many over raising money from traditional VCs and outside investors. An ICO is an initial offering of a company’s token or ‘coin’ – a cryptocurrency specific to that company. Each company can denote what the token is worth in value as well as the initial price. The buyers of the coins aren’t taking equity, they’re essentially making a bet that the company they’re buying the coin from will increase in value, which would, in turn, increase the value of the coin tied to said company.
Identity protection startup Civic raised over $30 million USD in their ICO before the sale even went live. Brave was able to raise $35 million USD in less than 30 seconds. Brave, an internet browser, created their own tokens which can be traded as currency for advertising within their browser, creating a better and safer browser experience for users as well as publishers and advertisers.
These ICOs have now allowed founders to raise large sums of money without giving away valuable equity. They are also attractive as they open up the investment space to non-traditional investors and provide immediate value, rather than traditional equity that may take years to produce any sort of liquidity. Digital currencies and tokens have essentially become their own asset class and investors of all types are looking for ways to get involved.
It definitely appears that cryptocurrencies are experiencing another wave of growth and modernization, and Ethereum is riding this wave to the top. The largest corporations are all looking for ways to get involved. Earlier this year thirty banks and corporations, including JP Morgan, Microsoft, & Intel, united to “build business-ready versions of their software” all using the Ethereum platform. This conglomeration, called the Enterprise Ethereum Alliance, may be one of the strongest indicators of the heights Ether will soar to. The goal of this alliance is to help develop private ultra-secure blockchain networks in order to assist with things like “post-trade settlements, payments between banks, and supply chain tracking” but will ultimately link up with the public blockchain, which will be open to all users.
From the Enterprise Ethereum Alliance, to the growing ICO market, the uses of Ethereum as a blockchain software are as vast as they are valuable. This value is reflected in the tremendous growth in Ether over the past year. With big name corporations on board helping to lend credibility, it seems that Ethereum is rapidly earning its place as the reigning king of blockchain, and could potentially leave Bitcoin in the dust.