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Ethereum is an open-sourced platform that was developed based on blockchain technology. It was launched in 2015 by Vitalik Buterin and three other co-founders. Ethereum was developed as a solution provider and an improvement on the Bitcoin blockchain technology, which is limited in its ability to handle more than one application at a time. Ethereum runs several applications called smart contracts all at the same time yet autonomously. Ethereum is both a platform and a digital currency known as an Ether token (ETH).
There are two versions of Ethereum:
- Ethereum (ETH) – Maintained by the founders and uses the original Ethereum blockchain.
- Ethereum classic (ETC) – Maintained by a different team and uses Ethereum’s soft fork.
How does Ethereum work?
Ethereum allows thousands of applications to be run on its blockchain as opposed to Bitcoin’s necessity to create a new original blockchain for every new application.
- Thousands of computers, known as nodes, run applications otherwise known as smart contracts using the Ethereum Virtual Machine (EVM). These nodes compete to solve the Ethash, an algorithm whose derivative outcome culminates in the creation of Ether.
- Once an Ether block is created, that information is distributed to the rest of the nodes on the network for validation. The block is then added to the blockchain and stored on all the nodes.
- Smart contracts are activated by funding them with Ether. They are created by setting a new coded account and uploading it to the Ethereum Virtual Machine. Whenever Ethereum requires running, a payment of Ether will be created for the powering of the contract and any other requisite information.
- Smart contracts execute ‘If” and “Then” conditions for Ether to be traded which provides a level trading ground and has rapidly gained popularity.
- Ethereum takes about 14 seconds to complete the Ether creation process as compared to Bitcoin which takes about 10 minutes to mine.
- Ethereum block sizes are about 2KB in contrast to Bitcoin’s 1MB and therefore relatively cheaper to run.
How Does One Buy Ethereum in 2018?
Here is the most comprehensive guide to buying Ethereum as of 2018:
- Registration. An exploration of the preferred exchange has first to be made. Once identified, all information in regards to personal details should be submitted.
- Proof of identity. Before any deposit or withdrawal, exchanges will undertake a “Know Your Customer” check by requiring proof of address and personal photograph and government identification. Some exchange platforms also do Anti-Money Laundering checks to see the authenticity of the buyer.
- Select a deposit method. Payment methods vary from exchange to exchange. A choice of a suitable one should be made. Each method comes with a fee and you can find the details on the website of the given exchange. The fee structure would give a good guide to the final selection of the payment method to be used.
- Payment. Deposit your fiat currency which can either be in dollars, Euros or any other that is acceptable for the exchange. It takes a day after depositing to have the deposit reflecting in the exchange account. This time period, however, depends on the payment method selected and the exchange itself.
- Make a purchase. Once money reflects in the Ethereum exchange account, Ether can now be purchased. There are platforms that are beginner friendly that could be quite easy to use while making the purchase such as Coinbase.
- Transfer the new Ether currency to the free Ethereum wallet or create a wallet of choice.
In order to avoid the thorough screening subjected to users on the exchange platforms, a by-pass option is available. This is using the peer-to-peer method and though risky, can be used to purchase larger amounts than an exchange can allow. One such peer-to-peer platform is the LocalBitcoins.
- Open a wallet.
- Purchase bitcoin.
- Anonymously exchange the purchased Bitcoins for Ether through ShapeShift.io..
Ethereum 2018 Update
The founder of Ethereum, Vitalik Buterin, published an Ethereum Improvement Proposal #960 in a March/April 2018 publication. In the publication, he recommended a maximum cap of 120M Ethereum tokens. He has also indicated the shift from Proof of Work to Proof of Stake, which is considered to be a more efficient method that will substantially reduce the inflation.
Also, a new type of fee, serving more like rent, has been introduced and has the potential to reduce the supply of Ether with time. This will act as an incentive to investors who had been apprehensive to the perpetual inflation of Ethereum.
Benefits of Ethereum
All decentralized applications benefit from all the blockchain properties as they run on it. The key benefits are:
- Immutability – The system is not susceptible to alterations in any way. All data once validated is changeless.
- Corruption & tamper proof – Apps are founded upon the principle of consensus, making censorship impossible. Transactions are conducted on shared computers and allow all users to check the records.
- Secure – The decentralized system allows no point of failure and using cryptography, applications are secured against hacking attacks and any attempts at a fraudulent activity.
- Zero downtime – The breakdown of one node does not affect the other nodes and the running of the applications as they are powered by all the other nodes within the network. There is never a failure or switch off in any App.
Who Can Use Ethereum?
Anybody can use the Ethereum platform to develop decentralized applications, smart contracts or issue tokens. You can build virtually anything on the Ethereum Virtual Machine. For instance, you can build:
- Tokens that can be traded
- A central bank system to issue money
- Cryptocurrencies that are based on puzzles
Major companies such as Samsung and Toyota have already experimented with Ethereum as a means of tracking the movement of goods along the supply chain that involve numerous parties.
Banks too are looking to replace exchanges and intermediaries and are considering using blockchain as the means to do that.
Also, banks require working on the principle of utmost good faith and the fact that they have no control over the integrity of their competitors. Blockchain may just provide the solution to that by tracking the complicated transactions that are involved.
In conclusion, Ethereum is becoming widely accepted and embraced by investors looking to a brighter future. Users can now harness the power of blockchain technology due to the user-friendly approach of the applications. Ethereum has triggered a new fast lane in decentralizing the world economy especially in the areas of finance, real estate, academic fronts, insurance tracking, healthcare especially the origin and movement of drugs and the public sector to name but a few.
The author owns Ethereum tokens
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