After Bitcoin, Ethereum is the most well-known of the other cryptocurrencies. Introduced in 2015, Ethereum is a distributed public blockchain network. Despite having has a turbulent history to date, Ethereum has a current market capitalisation of US $26 billion.
Ethereum differs from Bitcoin in both aim and capability. Bitcoin is essentially focused on one area of blockchain capability, which is running online peer to peer electronic cash system that facilitates online Bitcoin payments. The Bitcoin blockchain tracks ownership of digital currencies; the Ethereum network by contrast is focused on running the programming code of any decentralised application. Ethereum also has much greater flexibility. While all blockchains have the ability to process code, most, like bitcoin’s are quite limited, Ethereum is different, and allows developers to create almost limitless applications, which go far beyond anything that has been seen previously.
There is another big difference. Instead of mining for Bitcoin, in the Ethereum blockchain miners work to earn Ether, a type of crypto token that underpins the network. Ether also allows application developers on the Ethereum network to pay for transaction fees and services.
One of the key features of the Ethereum platform is the concept of a Smart Contract – essentially a computer protocol which facilitates and enforces the performance of a contract. The Smart Contract is, in essence, a legal agreement between you and the service provider – public, verified code that lives on the public ethereum blockchain. A smart contract is like a computer program that is automatically executed when specific conditions are met. And, because they are run on the blockchain platform, contracts will be executed just as programmed – with no possibility of downtime or third party interference.
One limitation with the Ethereum system is that any code is only as good as the human who wrote it. Smart contracts are written by humans who make mistakes, so any code errors or bugs can only be stopped or eradicated by getting network consensus. Somebody will then need to intervene and re-write the code – which goes against the ethos of a distributed network!
Another main feature of Ethereum is the use of meta tokens or coins, supported by the platform and powered by the Ethereum Blockchain. Meta coins can be regarded as a new financing model for projects (in fact, crowdfunding for the development of the Ethereum platform itself was enabled through meta tokens)! Meta tokens act as a kind of share in the underlying project and, because the blockchains, on which the tokens, or coins, live, are open and distributed, anybody can invest in a project. Participation in project funding is no longer limited to investment banks or finance industry insiders. With a blockchain, meta-coin investors directly benefit from ownership of the token itself.
Where Ethereum potentially offers so much more than Bitcoin is because it is active, with its own programming language called Solidity. This makes it much more powerful than Bitcoin which is, essentially, passive in nature – if you want to make a transaction, load up your wallet, input an address and amount, and hit “send”.
Ethereum by contrast offers the possibility of acting like a giant super computer on which anybody can execute code. It is the potential that this offers, and the much wider possible applications of the Ethereum blockchain which has got so many major firms and governments interested in the technology, and which should see its market value continue to rise.
