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What Is Ethereum? A Simple Ether Currency Guide

Ethereum has grown rapidly to become the second largest crypto system by market capitalization in 2018.

The Ethereum Project

To quote its Whitepaper:

Satoshi Nakamoto’s development of Bitcoin in 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.

The point here is that if you’re looking at Ethereum with any sort of reverence (in terms of an “investment” or other), you’ll be best looking to understand the core aspects of the system, and how it’s meant to provide the underlying ability for any software system to become decentralized.

Before continuing, we need to stress that this article is for entertainment & education purposes only – any mentions of specific products are just examples and do not constitute an endorsement or recommendation.

What Does Ethereum Do?

To understand how the Ethereum platform is able to work effectively, you first need to comprehend the underlying value that Ethereum brings to the table, as well as the ability for any of the central systems to create an effective solution for the software. This tutorial is going to explain how to do this effectively.

How Does Ethereum Work?

Ethereum is a network service which allows “crypto” applications to harness the power of a platform to perform their transactions. Rather than having to create their own “blockchain” database, and corresponding network of “miners” or “contributors”, systems are just able to tap into Ethereum’s underlying infrastructure (using its ERC-20 token) to provide “decentralized” functionality to their applications.

What Is Ethereum Used For?

The main reason for Ethereum’s creation was to bring about “decentralized apps” (DApps), which would run through its infrastructure with what the founder called “smart contracts”.

What Are Ethereum Smart Contracts?

These “smart contracts” are basically what Bitcoin provides (transactional ability), but with the added benefit of having stipulations in order to only execute the transaction at a particular time.

What Can You Do With Ethereum?

The main benefit to having/using DApps is the way in which they’re able to interface with others. Unlike today, where computing systems are isolated and dependent on data providers, the “decentralized” systems of the future promise to bring autonomy and data-sharing beyond anything that is present today. Consequently, the idea that Ethereum is going to bring DApps to the wider business environment is not only something that people are considering deeply, but also trying to measure against its price.

Who Created Ethereum?

The Ethereum network was created by Vitalik Buterin in 2015, and was the first to introduce the idea of “smart contracts” to the world of cryptocurrency. A Canadian national, who moved with his parents from Russia when he was 6, Buterin was recognized by the Thiel Foundation, who awarded him a $100k prize before going on to create the Ethereum cryptocurrency.

Will Ethereum Rise Like Bitcoin?

The bottom line with Ethereum is that many people have flocked to it because of its promising presence in the world of enterprise, as its “DApp” system can be used by any sort of business to streamline processes. It was also first with the idea of “smart contracts”.

However, the problem with ETH is actually several-fold. It does NOT have a strong “business” foundation.

Ethereums ability to become a real (profitable) business in itself is slim because of the way it doesn’t really have a “product” or “service” that it’s able to sell at scale. In other words, the system itself has been designed to predominantly be a technical exercise rather than a purely business one.

Whilst this isn’t a problem in the “early” phases of a technology marketplace (where people are enamored by the technological solutions), it does become an issue when people start looking at more economic reasons to “invest” into the system, and this will become evident with any contractions in the market.

Should You Invest In Ethereum?

It is NOT supported by many major players in the industry at this time. This isn’t a problem in itself, but is indicative of how much growth the system could see. Most specifically, one of the big signs of whether a member of the tech industry will become successful over the long term is due to embedded they are with a community at large.

It’s often the case that in order to get involved with the biggest customers, a business will require some sort of network connections. This means that if you’re looking at the likes of

Stellar Lumens – with its huge advisory board – or Ripple, which received funding from a number of prominent VC’s, they have a much stronger chance of making it in the corporate world than the others.

Ultimately, a much better prospect in this space is “Ripple”, which both supports similar functionality to Ethereum and has an increasing level of industry backing.
Founded in 2004 (5 years before Bitcoin), Ripple went through a number of changes in order to become what it is today. It received VC funding and has a growing business of over 150+ employees – all working on implementing “blockchain” functionality for banks and financial institutions around the world.