Ether is the second largest cryptocurrency in the world. Many even speculate it could rise up to be the largest by the end of 2018. But Ether is simply the fuel for a blockchain protocol we call Ethereum.
Ethereum is a platform which enables developers to create Distributed Applications with the inculcation of Smart Contracts. It uses the blockchain technology to adopt and accommodate a variety of applications. It is basically a public distributed blockchain network which focuses on running the programmed code of any decentralised application.
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Our Take
Despite flying under the radar for a large section of the masses in the crypto community, Monero boasts of a cult following amongst those aware of it. Many have even gone on to call it the ‘true Bitcoin’. All this is because of its significant focus on privacy, which is what many expected originally from Bitcoin. Let’s better understand why Monero is the dark horse of the cryptocurrency world.
History
Vitalik Buterin, a Toronto-based researcher and programmer, wasn’t happy with the ways of the blockchain community. According to him, there could be much more done with this data structure than just using it for certain applications. Hence, his predicament led him to the proposition of Ethereum in 2013. The formal development of Ethereum began in January 2014 and went on through Ethereum Switzerland GmbH, a Swiss company.
This project needed great amounts of funds to progress. Ethereum developers opted for a much revolutionary approach by opening an Initial Coin Offering (ICO) in July-August 2014 with Ether as its coin tokens. This raised around $18 million in Bitcoin or $0.40 per Ether. The project went live in 2015 and by 2016 the value of Ether went as high as $14 per token with a market capitalisation of $1 billion in about 1 year of its inception.
In March 2017, various blockchain start-ups and companies decided to join in and created the Enterprise Ethereum Alliance (EEA) including 30 founding members. This was a non-profit organisation with 116 members like Toyota Research Institute, Samsung SDS, National Bank of Accenture. By July there were more than 150 members in the alliance with additions like MasterCard, Cisco System and Scotiabank. From around $20 at the start of the year, ETH was trading at around $290 during September 2017.
This foundation developed several prototypes of the platform to test and regulate different protocols as a part of their Proof-of-concept series. ‘Olympic’ was the last of these prototypes which provided users with 25,000 ethers for testing the stress limits of ethereum blockchain. ‘Homestead’ was the first prototype to be considered stable which included transaction processing, pricing and as well as security improvements. ‘The Frontier Network’ marked the experimental release of the system in July 2015. Later on, in October 2017, ‘Metropolis 1 : Byzantium’ was launched to upgrade the complexities and provide flexibility to smart contract developers.
Yet, Ethereum faced many challenges. In 2016 a decentralised autonomous organisation sold a set of smart contracts developed on the platform which raised a record $150 million to fund the project. Yet, the event sparked a debate in crypto-community that Ethereum should reappropriate their funds, when it was discovered that $50 million of these funds were claimed by an anonymous entity. This led to Ethereum facing heavy criticism for potential security concerns. This attack raised many questions about the reliability of Ethereum. As a result, the network performed a “hard-fork” which split Ethereum in two. Ethereum (ETH) continued on the forked blockchain while Ethereum Classic (ETC) continued on the original blockchain, creating a rivalry between the two networks. After that, the Ethereum blockchain experienced a few more forks that led to the emergence of Ethereum-based cryptocurrencies like Expanse, Ethereum Fog, Ether Zero. This led to Ethereum increasing the DDoS protection, debloating the blockchain and thwarting spam attacks by hackers.
The total supply of ether as of January 2018 is 98 million. In 2017, miners generated 9.2 million new ether tokens corresponding to 10% increase in total supply. It is regularly traded by cryptocurrency brokers, exchanges as well as many wallets. As of January 2018, more than 150 stores accept ether. There is currently no limit at the supply of ether but it is expected to end at some point of time making it deflationary.
However, ETH has been considered highly volatile by experts. But it’s not the same case as the ether coins but due to the technology involved behind it. Ethereum has been highly evolving and constructive towards it approach to minimise user losses and vulnerability to attacks. Consequently it has gained high attention. But what is this technology that makes Ethereum so special?
When you wonder about the working of Ethereum, you must concentrate on three things:
#1 Smart Contracts
In simple terms, it is a programming language that enables developers to write softwares through which blockchain can manage and automate specific outcomes. It is just a set of rules, in the name of a contract, written in code. It is a software that executes the terms in the agreement once the conditions are fulfilled eliminating the hassle of doing it manually.
For example, if a certain user wants to send ETH to another user, they would write a new contract in the blockchain for this transaction. As soon as this contract is complete the ether would be directly transferred from the sender’s account to the recipient’s account. Additionally, these Smart Contracts act as a multi-signature account that could only spend funds once a required number of people agree upon it. Doesn’t it look like an idea with limitless opportunities? The potential is arguably very high with projects already headed in areas such as insurance, financial services, legal and crowdfunding.
Smart Contracts completely cuts out the middlemen involved in a particular transaction thus, minimising the extra costs. They are encrypted on the public blockchain where all can see their market activity. And they eliminate the time and process required to process documents.
#2 Ethereum Virtual Machine
Ethereum is more than just a network or a cryptocurrency. It is a language that allows developers to write their own programs. This is Ethereum’s core innovation. It is a turing complete software, meaning it can compute broader set of instructions. It runs on the Ethereum network providing a runtime environment for smart contracts in Ethereum. It is a 256-bit stack which registers the Smart Contracts and forms the fundamental mechanism for the network, runs the code as intended as well as produces a consensus among the nodes. The EVM is isolated from the files or processes in the network.
The main feature of the EVM is that it allows anyone to run any program regardless of the programming language it has been coded in, given enough time and memory. It makes the process of maintaining the blockchain and creating blockchain applications much easier as it eliminates the process of creating an entirely new blockchain for every new application, rather enabling the development of potentially thousands of applications on one platform.
Every Ethereum node must run an EVM implementation and execute the instructions. The network contains 27,500 nodes as of February 2018. The EVM has been implemented using various programming languages such as C++, Java, JavaScript, Python, Ruby, Rust and WebAssembly which is still under development. This is actually expected to become a major component of the “Web3.0”, a ‘world wide web’ where users interact with Smart Contracts using a browser.
If you want to develop an app using Ethereum, you might want to use its native Mist browser which provides a user friendly approach to your interests with an interface and digital wallet. These could be used by users for trading Ether as well as writing managing and deploying their application using Smart Contracts. It is a portal into the world of decentralised apps. People without technical knowledge or background can also give it a shot as the Mist interface provides them proper assistance through app development. This is a revolutionary step towards bringing unregulated applications into the mainstream.
#3 Ether
Ether is the fundamental currency for operation of Ethereum network providing a public leger for transactions. It is used to pay ‘gas’, a unit of computation used in transactions and transitions. Ether is listed under the code ETH in the cryptocurrency exchanges, mistakenly regarded as Ethereum as well.
Like all other cryptocurrencies, ETH makes use of a blockchain in the continuous form of blocks as its ledger for recording transactions. Miners are responsible for verifying Ether transactions by solving complex cryptographic algorithms. The difficulty of these algorithms can be altered to keep the processing time of block generation constant—around 15 seconds. These are linked and secured using cryptography. Once a miner generates a new block, a set number of ETH tokens are earned, which is known as the ‘block reward’. This number is currently set at 5 Ether units.
Ether operates accounts in a manner called state transitions. A state denotes the current balance of all accounts and data. This is not stored on the blockchain, but on a seperate Merkle tree. A cryptocurrency wallet stores the public and private keys which can be used to send or receive Ether. Public key is needed to send coins to an account while the private key makes it possible to write in the blockchain, making a transaction effective.
Ether can be bought and sold on all kinds of crypto exchanges over the internet. It is one of the most prominent cryptocurrencies in the world. It is used mainly to transact inside an Ethereum network for operations like paying the transaction fees, gaining access, using tools for application development, etc. Yet, investors have found it as an interesting investment opportunity with the security and reliability that it provides. People have invested largely in ETH since the very opening of the Ethereum ICO in 2014. With two years of its inception, ETH now holds a market capitalisation of more than $50 billion and this value has reached over $61 billion in its course of time. It is often considered as the cryptocurrency that could one day beat ‘the giant’ Bitcoin to become the world’s largest in crypto-coin value.
This has been possible because of the ideology behind ETH which never followed the path to being just another cryptocurrency. Ethereum has found revolutionary ways to implement the much trendy concepts of blockchain, cryptocurrency and application development. The innovation of connecting people through applications and smart contracts has given Ethereum a much noticeable edge over all other counterparts. It stands out in its approach as it creates a platform where people are free to program in any language they want, simultaneously, earn with their holdings of Ether. Hence, if they can somehow produce a successful application which creates interest in the public, it would become the icing on the cake. Moreover, the platform itself helps you to develop these applications by acting as a guide throughout. So even if you have little or no knowledge about the field, you can still learn through the process. Otherwise, like a general investor, you may still hold your coins and wait for the value to grow.
Nonetheless, even if you do not want to engage with the network, and just host your coins into a wallet, ETH might be the perfect choice for you. Since the start of 2017, ETH has grown at an incredibly rapid rate. The coin has grown in value dozens of times and analysts believe it still has new heights to scale by the end of 2018. It currently trades at $602 per coin or 0.0675 BTC.
Should you buy Ethereum?
According to a report by CoinDesk, Ethereum had hit a record $1,417.38 on 10 January 2018. It has surged roughly 13,000 percent in value over the last year. The main reason behind this high could be the strong buying support for this cryptocurrency. This has started after the declaration that fourth quarter transaction volumes on the network were doubled surpassing 10 transactions per second. This could have led the investors to buying Ethereum at a faster rate. This is amidst the fall of all its closest competitors.
While Ethereum has been performing well on the market cap basis, two of the other largest crypts have reported outflows. Investors have noticed the wise use of the funds raised through the Ethereum ICO which has led to the impressive development of Ethereum technology. It is also exciting that companies such as Microsoft Corp and JP Morgan Chase are developing applications based on Ethereum blockchain. The price of ETH is a testament of the growing popularity about it in investors. A likely increasing number of projects on the Ethereum network is going to put more money into the cryptocurrency and hence it could lead into Ethereum overtaking all its rivals.
With the technology and services that Ethereum provides today, it is unlikely that the number of projects on its blockchain will decline in number. This means the cryptocurrency is ultimately going to keep gaining attention as well as a hike in price. Plus the increased popularity does support the above conclusion. Hence, it does look like the right time to put your money into ETH.
ETH vs Rivals
#1 BTC
The biggest rival to ETH has always been considered to be Bitcoin BTC. The race for supremacy has lead to Ethereum following the latter to the top of the cryptocurrency table. It might not be long before it finally surpasses BTC, yet, the loyalty of Bitcoin investors as well as the number of Bitcoin investors all across the globe, makes it a challenge, and makes Bitcoin the biggest rival for Ethereum.
#2 Ripple
From one innovation to other, Ripple has become the next generation of cryptocurrency. Though it is similar to Ethereum in removal of middlemanship, yet XRP provides much needed solutions to the investors for international fund transfer and banking. Its collaboration with most of the leading banks in the world has brought great notice in the crypto-world. It does give ETH a big competition having surpassed it twice already for the second position.
#3 Litecoin
Considered the clone of Bitcoin, Litecoin provided extremely fast and secure transactions. It is completely based on the concept of Bitcoin, yet it has adapted to changes faster and better, for example, it was the first crypto to adopt Segregated Witness. This ability of decreasing the transaction time and increasing the block generation rate has made it a prominent member of the crypto-family and a likely competitor for Ether.