Ethereum: Trade Cryptocurrencies with ETN
The Ethereum financial system, bitcoin’s biggest competitor, uses blockchain technology for “smart contracts”. The contracts are executed in decentralised nodes and safeguard the integrity of transactions effected in the system’s proprietary currency, the “ether”. Ethereum was originally created to make it easier for developers to sell and protect their apps independently.
Ethereum stemmed from the bitcoin concept and was the work of Vitalik Buterin. Though involved in the bitcoin scene, he wanted to greatly enhance bitcoin’s functions at a technical level. Since his idea attracted little enthusiasm, he developed his own vision of a cryptocurrency as a platform that used blockchain technology for transactions with different values. The coins, designated as “ether”, are generated to in a similar way to bitcoins. Initially conceived of as a means to an end, they are now traded on exchanges.
Ethereum: blockchain technology for smart contracts
Expanding the Ethereum payment system by smart contracts means that the system is not only ideal for selling and buying software or issuing and managing licences as originally intended. It can also be used for very real goods such as property or vehicles. To do this, users create their own tokens which, unlike bitcoins, are tied to a small program called a smart contract. When the agreed sum is transferred in ether (ETH), the program is automatically executed on the nodes. After verification and acceptance, the user is entered in the blockchain – which is tamper proof – and the sum can be received.
In this way Ethereum extends the original concept of a cryptocurrency to the sale of software and material goods – formerly organised along centralised lines – without any middlemen. Whereas previously banks, lawyers or even an app store had been needed, the integrity of the transactions is now guaranteed by the blockchain. Unlike the data on typically centralised servers, which can easily be manipulated, the data sets are continuously captured in blocks on all devices belonging to the Ethereum network and then processed, verified and saved on them. Any attempted tampering shows up at once and can be immediately stopped.
Mining and management in the Ethereum system
In this regard, too, the major cryptocurrencies are similar. They can be acquired in return for conventional currency, or mined independently, or be used to pay for goods and services. The transactions are generally encrypted and executed anonymously, with only the public signature, the credit, and the planned transfer being visible in the network. In this way, other members can verify transactions and register them within a block, the basic building unit of blockchain technology.
Alternatively, new ether can be mined, entailing tasks that use special mining software, computing capacity, and the electricity required for this purpose. As payment for blocks that become part of the blockchain, users receive a specific number of newly generated ether tokens, in addition to the return from mining. The requisites for ether mining are decidedly more stringent than those of bitcoin. Users who do not want to invest in the necessary hardware can fall back on cloud mining. They then pay external service providers to perform the services required.
Ethereum as an attractive investment object
Although bitcoin is still the undisputed number one cryptocurrency, Ethereum has now gained position number two. Clearly the establishment of the Enterprise Ethereum Foundation was the key to boosting its momentum. Here the combined group of 200 renowned companies are testing the Ethereum blockchain in a wide range of fields in order to effectively tap its great potential. If substantial demand is generated, the technology upon which it is based can sharply increase in value as a result.
Against this background, the opportunities for investors are clear. In contrast to the process of buying digital currencies, ETNs – Exchange Traded Notes based on the mean values of Ethereum rates in the largest trading floors – are easy to buy and administer. These exchange-traded bonds payable to bearer are related to the mean value of the ETH rate in US dollars and are also offered in collateralised form.