Ethereum — More Than A Cryptocurrency
Ethereum is a platform launched on June 30, 2015. It is used to create decentralized applications based on the blockchain technology with the help of smart contracts.
In January 2016, the platform gained momentum that reached its peak in March 2016. Within nine months the market capitalization of Ethereum exceeded $1 billion.
Once the craze quietened, the value of the coin has declined a bit. However, Ethereum still remains the second largest cryptocurrency after Bitcoin in terms of market capitalization.
What is the secret of Ethereum success?
The very same thing happened to Bitcoin, which witnessed a skyrocketing growth in winter 2013/14. The popularity and dearness of BTC resulted in the appearance of several thousands of alternative cryptocurrencies, but not all of them could succeed. A number of the tokens became popular, however, none managed to repeat the success of Ethereum. More than that, the Ethereum Blockchain was introduced by Microsoft as a Service (EBaaS) based on Azure platform in November 2015.
But how comes that Ethereum could climb so high while other altcoins failed?
The reason is quite simple: Ethereum has the same advantages as Bitcoin, but its functionality is wider.
Decentralization and the way of the Bitcoin network distribution are the most prominent advantages of it, as users are both clients and servers that boost protection and resilience of the network. In the previous versions of the system a single server ruled the whole network centralization. It was its main vulnerability, so the system was prone to hack attacks.
What are advantages of decentralized networks?
- Hack attacks resistance
- Continued workability even when the system is partially down
- Human factor has no influence on the efficiency of the system
- Data integrity
The last point deserves a more detailed explanation.
Each and every member of the Bitcoin network has an opportunity to look through the list of all validated transactions and get acquainted with the information about a sender and a receiver of a cryptocurrency (however, without access to personal and financial information about participants of the transactions). Due to the peculiarities of blocks in the Blockchain, the records about transactions are virtually unchangeable. When it comes to the payment protocol, this advantage becomes clear. However, this is not the only way to use it.
Basically, the Blockchain can be used in any area that requires data registry, thus boosting protection of information and making it more well-disposed:
- Ownership records
- Business contracts
- Domain names etc.
Issues connected with the implementation of the Blockchain
There were two unsuccessful methods that aimed to create new apps based on the blockchain. The first one was an attempt to develop applications by using Bitcoin’s script. Unfortunately, that didn’t work out – this script is unfit for solving issues that are easily solvable by any other popular programming language. The use of this script calls for a lot of workaround − cake is not worth the candle.
The second method was to create and promote a new alternative blockchain – so you won’t be able to take an advantage of the possibilities of the Bitcoin network. Thus, you will be obliged to run the whole new blockchain to support a single app – it is an expensive decision.
Ethereum has managed to solve the issue by offering a fully-fledged programming language with its own blockchain. Thus, by using this language anyone can create an application, code it and use the ETH network to execute it.
In other words, Ethereum is a decentralized computer spreaded all over the world and in theory its possibilities are unlimited. So when a developer creates an app and deploys it to the network, the self-sufficient network won’t just execute the app – it will also verify the outputs and distribute value among participants of the network. Thus, all apps work without a server and transparently. And what is more important, the power of the network is estimated by the number and power of computers.
Ethereum aka the World Computer
It is impossible to calculate the number of potential uses of such system, as there is no limit to the possibilities it offers. Thus, for instance, Ethereum can improve existing marketplaces by getting rid of Google AdWords or Facebook Advertising as mediators. The solution for this problem lies in utilization of smart-contract technology that will create counterparts of all business processes, which involve the chosen companies and run those counterparts on the blockchain.
The solving of challenging scientific tasks can become as simple as rolling off a log with the help of Ethereum coding, as it uses all network power to make calculations – and even the most advanced supercomputers won’t be able to compete with this network in terms of efficiency.
One of the non-typical examples of applying theoretically unlimited power of the network is the Augur project. This “Decentralized Prediction Market” is able to deliver higher-precision predictions compared to forecasts of the best experts in this sphere, as it will utilize the “wisdom of the crowd” principle.
What are the predictions for Ethereum?
Judging from the perspectives, Ethereum can expect further boost of popularity and development. On the one hand, with all the possibilities of the Ethereum network this cryptocurrency won’t fall off the edge of the earth. On the other hand, it is impossible to predict the speed and the range of the development of the coin and network, as it is turned upon many factors.
It is necessary to highlight that despite theoretical unlimited opportunities, the success of Ethereum is subject to the talent of developers and the network power.
What do experts say about Ethereum?
Experts usually highlight specific points about Ethereum that many people usually don’t pay attention to. Ethereum is the blockchain, first of all. It is widely used by large companies due to its convenience. Although it cannot compete with the Bitcoin blockchain in terms of security. Also one should bring into notice that the economics of these two networks operate in different ways, and in the future companies will likely choose between these two systems instead of creating alternative ones, that are not that efficient.
According to the Fund Manager of Bitcoin Capital Simon Dixon, it is possible to draw connections between the Ethereum blockchain and the Java database. You build your app in Java by using database for storing data – you create an app in Ethereum storing data in blockchains. However, there is a difference: blockchains run on several distributed servers.