What is Ethereum?

What is Ethereum?

What is Ethereum?

Ethereum is an open source platform which allows users to build the next generation of decentralized applications. It’s an abstract idea that the governing authority in a company or financial institutions can be eliminated, by building trust due to the high visibility of the workings rather than having to trust companies blindly.

The essence of the project is using the blockchain technology which works in a peer to peer fashion, thus eliminating the need for a middleman or the authority.

Most applications today are centralized and you need to trust the authority which is in charge of the privacy or safety of your information. In a blockchain based service, your private information, funds, and content all belong to you and therefore they’re as secure as they can be. In this article, I’m going to discuss the two faces of Ethereum. The currency that everybody hears about and the non-currency related blockchain applications that the Ethereum team is working on.

The currency.

Most people hear about Ethereum, or Ether, the currency which is now working wonders in the digital currency market.

Ethereum has grown from $0.10 to around $400, which is pretty impressive for a digital currency. However, the mainstream media has taken this growth as a sign indicating that digital currencies are a bubble. Unfortunately, there’s a great technological difference between Ethereum and other currencies. Ethereum is essentially a platform where you can build decentralized autonomous organizations or applications which help people avoid middlemen.

That’s why Ethereum, the currency, is one of the safest investments in digital currency today.

Quite recently, there was a rumor of the founder Vitalik Buterin’s death on 4chan. This apparent declaration of death was a strong enough influence to shift the market by over $50. The rumors were dispelled by the founder when he uploaded a selfie to his official Twitter. Since traders were quite reactive to this situation, they became much more easily influenceable. Just two days later, a multi-million dollar trade brought the price of Ethereum down to $0.10 from $380. This resulted in many losses, several traders claimed to have lost over $5000 on Reddit.

Even though the currency experienced a major flash crash, the currency recovered in a few hours, and that’s a testament to how strong the community around Ethereum is. So you can be pretty sure that Ethereum is a great investment in the long run.

 

The global decentralized movement

Tokens

Ethereum users can create and issue virtual tokens that can represent stock or have a virtual value. The tokens can be used in a participation/reward system. Imagine every time someone watches an online advertisement, they receive a token. They could use this token to actually purchase physical goods on applications using the Ethereum blockchain. 

Not only that, you can actually carry out an ICO on the internet. ICO stands for initial coin offering. Remember initial public offering? It’s the same concept but the company that wants to raise funds just generates a specific token which represents a share. The company then sells this token to the people who would like to buy them. The token will represent a share and their investment will grow if the project is successful.

There’s a project that very recently raised over $150 million in an ICO. And remember, it’s a token that’s based on the Ethereum blockchain. So people trust the platform enough to raise $150 million, you can be confident to invest.

Elimination of Middleman

One of the great applications of Ethereum can be the elimination of the middleman. Ethereum is a peer to peer network. In essence, the network eliminates the need for middleman applications. By this, we refer to Airbnb and eBay, because it’s pretty easy to do all of this on a P2P network. These companies’ profits would be wiped if everybody had access to Ethereum.

Since the middleman is eliminated, there wouldn’t be a need for traditional banks. You’d pay a small transaction fee every time you would send money or receive money but it would usually be around 1% and you’d receive your money instantly. You wouldn’t have to visit the bank to deposit a check.

You’d pay a small transaction fee every time you would send money or receive money but it would usually be around 1% and you’d receive your money instantly. You wouldn’t have to visit the bank to deposit a check.

Financial Industries

The Ethereum blockchain revolution will affect the banking industry the most. The blockchain method of payment reduces post-trade processing time thus increases efficiency and saves a lot of money. In an interview, Thomas Olsen claims that the global financial markets could save over $15 billion and $30 billion a year by adopting blockchain payment methods. It’s one of the best ways for consumers to transfer, send and receive money. The banking sector is well established today and is starting to understand how they can provide higher value to customers using blockchains.

So what is it?

In the near future, you can expect to see a lot of applications that choose to work on the Ethereum blockchain. So Ethereum isn’t only the currency, it’s a platform that applications in the future will be built on. It’s like being on the AppStore, except you’re on the blockchain. Unlike the AppStore, anybody on the blockchain can share the applications that they build. You would only have to pay Ethereum the processing power that your application takes on their blockchain.

Ethereum’s CCO suggests a new concept of loans in the company videos on Facebook. Take the example of a micro-finance in a small village. If you’re given a loan and you default, nobody would give you a loan again. In Ethereum, you could back loans with reputation rather than assets, a type of loan which is increasingly successful in developing countries.

So, wait a few years and you might hear about blockchains changing the financial, medical and marketing industries. And a large amount of them will happen on the Ethereum blockchain. If you’re thinking of trading Ethereum, now might be the time.

If you’re interested in Ethereum, check our guide for the best Ether Brokers in 2017

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About Article Author

Michael Serrano
Michael Serrano

Michael is an engineer and a bitcoin evangelist. He has been involved in cryptocurrencies since 2013. His biggest wish? 1 billion users of bitcoin, ether and litecoin by 2020. In the last 10 years he has worked for various early-stage start-up as a back-end developer.

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