Tech Giants See New Investment Opportunity
Remember the Bitcoin gold rush? That may be happening again, but this time there’s a new digital currency challenger on the block.
Called Ethereum, the alternative digital currency uses a similar blockchain system as its older and more successful counterpart, but has a slightly more sophisticated set of applications due to the smart payment system that can be written directly into its blockchain.
What does that mean? It means that with Ethereum, it’s possible to program binding agreements into the blockchain that enable people to, for example, place bets on a sports game and then set a mandatory pay out to whoever becomes the victor is before the results are known. The system is called a “smart contract” system and could be used for anything from gambling to online banking to Ponzi schemes.
This capability was precisely what 21-year-old Russian-Canadian Vitalik Buterin had in mind when he dropped out of Waterloo University in Ontario to create the software in question. Ether has since become one of the only alt-coins to present serious competition to the Bitcoin; the price of Ether has risen from $1 to $12 over the course of the last three months and JPMorgan already has set up its own private Ethereum network and blockchain.
The total value of all Ether currency has been toggling back and forth across the $1 billion line, putting it at second place to Bitcoin’s $6 billion value.
Bitcoin has been perilously close to losing the momentum ever since a rift was created among users regarding certain software developments. The dispute has caused many foundational creators to wash their hands of what some of them call a “failed experiment,” and many potential investors and banks have developed an ear for other digital currency opportunities.
The Ethereum system can be described as a single shared computer that is run by a network of users and on which resources are parceled out and paid for by Ether. Similar to Bitcoin, Ethereum’s success can be largely attributed to its ability to attract a dedicated network of users who have supported the software in hopes that their efforts will increase the value of the Ether they purchased.
Although Ethereum’s overall currency value may be well under that of Bitcoin’s, its network of supporters rivals that of Bitcoin by much closer margins. Last week it was recorded that just under 6,000 computers (called nodes in this context) are helping to support the Ethereum network. The Bitcion network has somewhere around 7,400 nodes.
One Ethereum co-founder, Joseph Lubin, is currently running a company called ConsenSys out of Brooklyn. ConsenSys has hired over 50 developers to aid in the construction of applications on and for the Ethereum system, one of which enables music distribution and another that makes it possible to perform a revolutionary kind of financial auditing. All of these efforts represent the rapid growth and hungry culture behind Ethereum, and perhaps explain its quick rise to 2nd place in the digital currency game.
“Bitcoin presented the broad strokes vision, and Ethereum presented the crystallization of how to deliver that vision,” said Lubin in explanation of his decision to throw himself into Ethereum’s development.
That said, computer science researcher at Stanford Joseph Bonneau has studied crypto-currencies for years and has stressed that Ethereum is far from a “sure thing.”
“Bitcion is still probably the safest bet, but Ethereum is certainly No. 2, and some folks will say it is more likely to be around in 10 years,” Bonneau stated. “It will depend if any real markets develop around it. If there is some actual application.”