What is Ethereum?
Curious to learn the answer to what is Ethereum?
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What is Ethereum’s History?
What is Ethereum’s Blockchain Use Case? (1.8)
The Ethereum Network is a worldwide virtual computer. It’s good to think of it as the Android platform for decentralized applications. Software developers can come and create decentralized applications on top of the underlying blockchain platform that Ethereum provides users.
These applications use smart contracts. A smart contract is a digital contract that is only executed once a set of user defined terms have been met. A smart contract is similar to a traditional contract but automatically enforces obligations.
Ether is the native token that is used on the network. Any party that wants to execute a process within the Ethereum ecosystem needs to use Ether to make it happen. In that way it functions as the oil that keeps the machine running.
Development and Management Team (1.9)
The Ethereum Project was started by Vitalik Buterin. Buterin is a remarkable individual dating back to his pre-teenage years. He was placed into school for gifted children at a young age and was drawn to math, programming, and economics.
He learned about Bitcoin when he was 19 years old from his father. After co-founding Bitcoin Magazine he moved on to write the whitepaper for the project. He dropped out of university to work on the project full time after receiving a $100,000 grant. Buterin is highly regarded in the crypto-realm due to his extreme intelligence level.
Ethereum was also co-founded by Dr. Gavin Wood and Joseph Lubin, two other highly regarded minds in the blockchain space. Ethereum’s current Executive Director is Ming Chan, a former consultant and MIT graduate.
Partnerships and Other Influences
The Enterprise Ethereum Alliance is a community of Fortune 500 companies and other organizations that aid in the development of the Ethereum network. Ethereum aims to be used by individuals and companies alike. The platform’s developers are also striving to help large organizations create efficiencies and by doing so improve economic production.
Representatives from the companies that make up the alliance interact with Ethereum subject matter specialists on an ongoing basis. Together they generate new ideas for platform improvement. Intel, JP Morgan, Microsoft, and UBS are just a few of the heavy hitters that make up this group.
If you would like to learn more about the Enterprise Ethereum Alliance you can visit their website by clicking here.
Ethereum also has close ties to some of the projects that are utilizing the Ethereum platform to generate blockchain applications and related tokens. Buterin is heavily involved in the OmiseGO project and continues to work on their latest development, the Plasma network.
What is Ethereum’s Competitive Advantages and Risks? (1.8)
The following are Ethereum’s main competitors:
These should be considered when determining the project’s strengths:
- Ethereum has many LARGE companies such as Accenture, BP, J.P. Morgan and Mastercard working with them. These large companies will provide the funding and expertise needed to grow the platform.
- Ethereum is also a software development platform. Think of it as a company that offers blockchain solutions as a service. This service facilitates the creation of new cryptocurrencies and programs that share a single blockchain.
- Ethereum is becoming a reserve currency for the crypto market. Many exchanges allow investors to purchase altcoins with Ether. This gives ETH another layer of value.
Risk can hint at a project’s chances of ending in failure:
- The Ethereum network experienced clogging after CryptoKitties, an online version of Tamagotchi, became popular on the platform. It revealed that Ethereum has a long way to go before it can scale to the levels needed to support large users (like Fortune 500 companies).
- Ethereum will be switching from a PoW to a PoS consensus model. Projects have made the switch before but none as large as Ethereum. Longevity can hinge on how the project handles the transition.
What is Ethereum’s Network and User Trends (1.5)
The Ethereum network has seen a significant rise in the number of transactions processed per day. On January 1, 2017 there were approximately 40,000 transactions which occured. Fast forward one year and there were almost 909,000 transactions processed. This is a very healthy sign. Ethereum’s network is being adopted at a faster pace and the network can handle a large number transactions.
However, more transactions usually results in higher transaction fees. In the beginning of 2017, a transaction only cost $0.0054 to process. However, as more users made transactions on the network, that amount rose to $0.635 in January 2018. By mid January 2018, the average transaction fee rose to $3.269.
At the beginning of 2017, the Ethereum Network had an average daily hashrate of 5,962.56 GH/s. At the beginning of 2018, the network had a average daily hashrate of 159,441.85 GH/s, an increase of over 26 times!
As of January 1, 2017, the network had ~21,000 active addresses. By 12/31/2017, the network had ~661,000 active addresses. The total amount grew to ~921,000 by mid January 2018 as that figure increased to ~921,000. This is a very good sign for the Ethereum network.
Financial Considerations (2.0)
Conclusion of “What is Ethereum?”
So what is Ethereum exactly? Ether is the second largest cryptocurrency currently on the market. The coin has an extremely solid blockchain use case and good competitive advantages. With good organizational support, an insanely strong management team, and a functional software development platform, Ether looks to be a great investment even at current price levels.
However, there are still some challenges the project faces. Direct foreign competition in the form of blockchain platforms like NEO could mean that the Ethereum platform will be closed out of specific markets. There have been rumors that Asian governments, specifically the Chinese government, might exclude Ethereum from the marketplace.
Previous issues with the code functionality, most notably the security weaknesses highlighted during the DAO incident, causes concerns. The platforms ability to scale and move from a Proof of Work consensus algorithm to a Proof of Stake consensus algorithm will be challenging. The development team is one of the most experienced in the industry but a scaling project of this size will be a true test of their ingenuity.
There are also many legal ramifications which must be overcome before smart contracts are used on a wider scale. Authorities are still trying to understand if it is safe to use smart contracts for anything but the most basic of transactions. Smart contracts are not reversible once they are released into the blockchain network. If a problem is discovered after the contract is executed only a hard fork of the network can resolve the problem.
Overall, Ethereum is one of the best cryptocurrencies in the market and has a very bright future. Potential challenges exist along the road but the development team should be able to overcome these challenges. As the technology evolves and the platform is refined even further, Ethereum’s influence should continue to grow.
It is one of the few coins that has the possibility of overtaking Bitcoin. 2017 was a fantastic year for Ether. This year should be just as, if not more exciting, for this cryptocurrency.
Overall Score: 9.0
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