Ethereum is only a couple of years old, but as acknowledged by top Cryptocurrency Exchange Platforms, it has quickly grown to exemplify and perfectly illustrate the use case theory of this sort of technology, demonstrating how the concept that underpins bitcoin can be applied to other areas of the global industry and, as discussed briefly above, can improve efficiency and reliability in each.
Well, sort of. It's not all rosy, as we'll get to shortly.
Anyway, Ethereum and its implications, especially as relates to a concept that is now widely referred to as an Initial Coin Offering, or ICO.
For anybody coming from a stock market background, as many probably are, this is where things get really interesting. Remember when we discussed alternative blockchains and their uses in the commercial space?
Well, Ethereum is an example of precisely that and – right now – is probably the most critical example is seen to date.
Before getting into precisely what Ethereum is, it's worth touching on what it is not.
Ethereum is not a cryptocurrency (although you will read this in many another cryptocurrency related publication, don't believe it); instead, it is a decentralized platform that is open source and is built on blockchain technology.
Developers can harness the Ethereum blockchain and use it as a base on which to build applications, with these applications rooted in what are called smart contracts. We will touch on smart contracts in a little more detail shortly, but first it is worth mentioning that the token that is used as a reward for processing transactions on the Ethereum blockchain is called Ether and that this token can both be used as a cryptocurrency (i.e., traded over a standard trading platform) and also a token with which to pay for processing power and other application-specific items in the Ethereum ecosystem.
That sounds pretty complicated, but it's not.
What is really important to understand, and what will hopefully make things a little clearer, is that bitcoin is a cryptocurrency associated with a blockchain that is set up to do one thing – register and record transactions from one wallet to another. In contrast, the Ethereum the blockchain is designed to allow developers to do pretty much anything, so long as the application of the chain that they are attempting to build can be rooted in smart contracts.
So, we've used that term twice now, what is a smart contract?
Think of a smart contract like an options contract that executes automatically, with the execution dictated by predetermined events that the creator of the contract built into the code at its creation. The terms may be the receipt, as registered electronically, of a product in the post, for example. When a receipt is registered, the contract is activated and automatically issues payment to the sender.
Again, it's important to remember that this is just one example of the application of a smart contract. The plethora of other potential uses are literally limited by the developer's imagination.
If a developer wants to write a small contract that can perform the function of a lawyer, for example, in a commercial dispute, they can. If a developer wants to create an options contract that expires at a particular strike price, but do so using a smart contract system that can execute the expiry without any third-party interference, they can.
Decentralized Autonomous Organizations
Right now, the platform that is the most convenient for these developers to execute and create these contracts is the Ethereum platform. It remains decentralized, just as with the bitcoin blockchain, but it can be adapted and harnessed to pretty much underpinning any use case. Not only that, but a variety of use cases can be combined to create what's called a Decentralized Autonomous Organizations (DAO).
Think about all of the separate elements that combine to create a large company in the physical world right now. Things like contract signing, recruitment, regulatory compliance, compensation issue, all that sort of thing. Each of these elements is governed by individuals and – as such – is open to human error. Human error costs time and money, so it is something that – if possible – the leaders of the company in question would like to eradicate.
Now imagine the same company but with all of these different inputs, and more, controlled and executed using smart contracts. The smart contracts have been coded and built on the Ethereum platform and will run seamlessly and continuously, without error, until altered voluntarily by the company that created them.
This combining of various smart contracts to perform a more comprehensive function (think about cogs in a machine) is a DAO. It's totally secure, 100% tamperproof and there is zero downtime associated with an organization set up in this way.
So where does all this factor into our overall discussion on how to profit from the cryptocurrency space right now?
Well, it's actually one of the most essential elements of our ability to do just that, and it is rooted in something called an initial coin offering (ICO).
Well, sort of. It's not all rosy, as we'll get to shortly.
Anyway, Ethereum and its implications, especially as relates to a concept that is now widely referred to as an Initial Coin Offering, or ICO.
For anybody coming from a stock market background, as many probably are, this is where things get really interesting. Remember when we discussed alternative blockchains and their uses in the commercial space?
Well, Ethereum is an example of precisely that and – right now – is probably the most critical example is seen to date.
Before getting into precisely what Ethereum is, it's worth touching on what it is not.
Ethereum is not a cryptocurrency (although you will read this in many another cryptocurrency related publication, don't believe it); instead, it is a decentralized platform that is open source and is built on blockchain technology.
Developers can harness the Ethereum blockchain and use it as a base on which to build applications, with these applications rooted in what are called smart contracts. We will touch on smart contracts in a little more detail shortly, but first it is worth mentioning that the token that is used as a reward for processing transactions on the Ethereum blockchain is called Ether and that this token can both be used as a cryptocurrency (i.e., traded over a standard trading platform) and also a token with which to pay for processing power and other application-specific items in the Ethereum ecosystem.
That sounds pretty complicated, but it's not.
What is really important to understand, and what will hopefully make things a little clearer, is that bitcoin is a cryptocurrency associated with a blockchain that is set up to do one thing – register and record transactions from one wallet to another. In contrast, the Ethereum the blockchain is designed to allow developers to do pretty much anything, so long as the application of the chain that they are attempting to build can be rooted in smart contracts.
So, we've used that term twice now, what is a smart contract?
Think of a smart contract like an options contract that executes automatically, with the execution dictated by predetermined events that the creator of the contract built into the code at its creation. The terms may be the receipt, as registered electronically, of a product in the post, for example. When a receipt is registered, the contract is activated and automatically issues payment to the sender.
Again, it's important to remember that this is just one example of the application of a smart contract. The plethora of other potential uses are literally limited by the developer's imagination.
If a developer wants to write a small contract that can perform the function of a lawyer, for example, in a commercial dispute, they can. If a developer wants to create an options contract that expires at a particular strike price, but do so using a smart contract system that can execute the expiry without any third-party interference, they can.
Decentralized Autonomous Organizations
Right now, the platform that is the most convenient for these developers to execute and create these contracts is the Ethereum platform. It remains decentralized, just as with the bitcoin blockchain, but it can be adapted and harnessed to pretty much underpinning any use case. Not only that, but a variety of use cases can be combined to create what's called a Decentralized Autonomous Organizations (DAO).
Think about all of the separate elements that combine to create a large company in the physical world right now. Things like contract signing, recruitment, regulatory compliance, compensation issue, all that sort of thing. Each of these elements is governed by individuals and – as such – is open to human error. Human error costs time and money, so it is something that – if possible – the leaders of the company in question would like to eradicate.
Now imagine the same company but with all of these different inputs, and more, controlled and executed using smart contracts. The smart contracts have been coded and built on the Ethereum platform and will run seamlessly and continuously, without error, until altered voluntarily by the company that created them.
This combining of various smart contracts to perform a more comprehensive function (think about cogs in a machine) is a DAO. It's totally secure, 100% tamperproof and there is zero downtime associated with an organization set up in this way.
So where does all this factor into our overall discussion on how to profit from the cryptocurrency space right now?
Well, it's actually one of the most essential elements of our ability to do just that, and it is rooted in something called an initial coin offering (ICO).