Reading the financial news many new technologies are being talked about. Bitcoin and cryptocurrency seem to be making endless headlines. Another blockchain based cryptocurrency system is also making the financial experts pay attention. Ethereum. What exactly is Ethereum and how does it impact our virtual and physical world? Does the average person need to know what Ethereum is? How is it being used in the “real” world? Here is a simple explanation for the non-techies around us.
Twenty years ago the internet completely changed the way we and our computers work together. Suddenly we had a new super-highway of communication and information. Ethereum is a network of computers that once again changes how we do business and send data. It is based on a blockchain like Bitcoin. Unlike Bitcoin is so many more applications than just as a monetary system.
Ethereum uses blockchain technology
Most websites have all their information they need to function stored on a server. Simply put, servers are computers where websites stores everything they need to operate. If this computer crashes, or the server goes down, all the data and the website are lost. Blockchain technology distributes information to a number of personally held computers. The information is public and websites can’t be shut down unless all those computers stop working. Bitcoin operates in the same way. This is referred to as decentralized.
Why is decentralized a benefit?
When you send a message to someone else, whether is it an email, text or through Twitter, your message goes through that company’s servers. It is stored there forever. Gmail, Verizon, Joe’s virtual message service has your information in their hands.
Ethereum uses a decentralized system. Your information is broken up into pieces or codes and distributed among many computers in a network. All the participating members of the network need to install a special program called MIST to take part. No one can see your full message except the person or company it was being sent to because they have the key to bring the pieces together.
Every computer participating in the network benefits from being a part of the team. They pay for the hardware, the electricity to run their computer, and share their processing power so they earn a “reward.” Members of the network do not gain any monetary benefit but they do earn Ether. Ether is a digital asset.
What do you use Ether for?
Ether is a type of crypto token that is the energy to power the network. Unlike Bitcoin, Ether is not an electronic peer to peer monetary system. Instead, it is a valuable asset that focuses on running programming code for an application. It allows the blockchain technology to be used for so much more than just a financial system.
Ethereum is basically a blockchain platform that can be used to create decentralized apps or dapps as they are known in this virtual world. These dapps have many applications. Developers can use this technology called Ethereum to create any type of operation they want.
Ethereum enables blockchain to be used for more than just a grand ledger. Code can actually be executed. What that means is special conditions can be written into the code. Special codes are referred to as “smart contracts.” These codes are agreements that be executed when certain conditions are met.
What’s the basic difference between Bitcoin and Ethereum?
Is there a difference between how you buy Bitcoin and how you buy Ethereum? Does the world need both? Why should you invest in one or the other?
The answer to these questions depends on your end goal. Corporations are finding reasons to use both cryptocurrencies. They are using them for financial reason and technological advancement.
- Bitcoin is a digital currency.
- Ethereum has many applications due to its smart contracts.
- Bitcoin’s block time is 10 minutes.
- Ethereum block time is 12 seconds.
- Much of the available Bitcoin has already been mined.
- Ethereum’s has had only about ½ of their coin mined.
- Bitcoin’s cost is limited by block size and the competition.
- Ethereum’s cost depends on bandwidth usage, storage and complexity.
The core difference between Ethereum and Bitcoin is simple. Bitcoin is designed to provide a fairly solid digital currency. Ethereum can be used in many virtual uses as a result of its ether and contracts.
Is this for the “real” world?
Ethereum is not just for the virtual world. It can have some very exciting real-world uses. These real world uses can affect the average person in positive ways.
- Data storage – Ethereum can provide a decentralized data storage system. Because of blockchain technology, it can enable encryption and quick transfer of data. It is also less vulnerable to hackers because it is not stored on a data farm in one place.
- Transportation – Self-driving cars can use Ethereum to revolutionize the transportation system. Self-driving cars will need to be able to communicate between vehicles quickly to be safe. Ethereum applications can provide this in a split second.
- Privacy – Every message you send is monitored by a server. An Ethereum app will provide a decentralized way to communicate. The blockchain technology would make it impossible for your information to be sold to companies wanting to monitor your habits.
- Business Transactions – Ethereum smart contracts will make business transactions more reliable and risk-free. Instead of waiting for a bank and a website being in between a buyer and a seller, contracts will be direct. Money and goods can be transfer at virtually the same time.
- Healthcare – Someday all your health information will be available to you and the doctor of your choice within seconds. It will also be secure and safe. This could save lives when only minutes count.
- Fighting Voter Fraud – Creating a voting app through Ethereum would means every vote cast is completely irreversible, transparent and logged. It also means no one can gain control of the network and tamper with the results.
- Identity Protection – Financial fraud and identity theft have become a real issue in our digital world. With Ethereum information could be stored on the network and only release what is necessary for any transaction making it impossible for someone to hack into accounts.
- Crowdfunding – Move over kickstarter. With this digital coin it will be possible do raise funds without a third party. That may mean less fees going to that third part and more of your donations being applied to the project or charity you seek to support. It also means your information will not be exposed to risk when you do contribute.
These are only a few of the incredible ways Ethereum can be used and can revolutionize the way we live. It will be difficult to know all the possibilities that Ethereum will be applied because it can be used for anything you can tell a computer to do. The network is backed by the power of everyone else on the network. Think of what could be developed is that was harnessed.
How do you invest in this cryptocurrency?
You may want to invest in Ethereum. The benefit over Bitcoin is that Ethereum has not only financial value but technological value as well.
You will need a digital wallet
The first step is to get a digital wallet like Coinbase. Coinbase is popular because it is free and has an easy to use app. There are other digital wallets just be sure the one you use is legit. You will not be able to invest in Ethereum any other way. It is not traded on any major stock markets and there are no cryptocurrency brokers. On Coinbase you will need to link your bank or credit card to purchase Ethereum coin.
Coinbase does provide a free digital wallet but it is recommended that you use move your coin to a different “wallet.” There are several types of wallets to use for your digital investment. Some you can download to your desktop or mobile device to store coin. Others required additional hardware but may be the most secure. This requires an external hard drive or USB drive.
When you invest in Ethereum or any other altcoin, you are buying is code. It is very important to protect your code from hackers and thieves. These codes are the identity of your coin and the only tangible thing you have to use your coin. Many investors recommend putting these codes on a USB drive and keeping it in a fire safe box or home safe. Don’t keep all your codes in one place. This will keep you from losing everything in an unfortunate incident. A bank security box is another secure location for storing codes. It is not the best idea to keep your codes on your hard drive. You would lose everything if a computer crash or a hack to your system. Codes are not retrievable once they are lost. Take precautions to keep them safe. Many coins have already been lost and are lost from the system forever. This does drive up the price of the remaining coin.
Monitor your transactions
When you buy your coin you can monitor your transaction with an Ethereum block explorer. This is a search engine that lets you look inside the Ethereum blockchain and see transactions. Cryptocurrencies are transparent and members of the network can keep track of all the activity that happens. This is one of the many benefits of this digital blockchain system.
Day trading possibilities
Once you are in the network you can hold onto your coin or use it do day trading. This has been a profitable endeavor for many investors. Many experts say Ethereum is one of the most promising technologies right now. They say purchasing Ethereum allows you to be a part of a very powerful network. One with unlimited applications. It has far more application possibilities than Bitcoin.
Investors can buy and sell their coin on an exhange or a professional trading platform. Look for ones with low fees, simplicity of use, few restrictions and good support and security. You also want to check on how quickly transactions are made. It is possible to lose a trade in the middle of the transaction if the exchange platform is slow. Do your research, read the reviews and pick the exchange platform that works best for you and your trading needs. There are many to choose from and more will be developed as cryptocurrencies become main stream.
Long Term Investing
Many investors feel Ethereum is perfect for a long term investment.. It seems to be solid and is the second biggest cryptocurrency. Ethereum’s application are many. As developers and organizations find more uses for this cryptocurrency it will become more secure.
Some people are purchasing pieces of Ethereum to store for their children’s future. They are confident in the longevity of this cryptocurrency. Could college funds comprised of Ethereum be the way parents someday provide for higher education? Perhaps cryptocurrencies will be how grandparents provide trust fundsfor future generations.
Remember, as with any investment, be sure to only invest what you can afford to lose. Just like the stock market the cryptocurrency market is subject to ups and downs in gain. Patience and time may be the way to prospering in this digital financial world.
Who else is investing?
Several Fortune 500 companies have decided to invest in Ethereum. They are research how to implement this new technology into their business plan and development. This move has made Ethereum even more valuable on the public market. These companies are looking for ways to make their business more secure and stronger. Ethereum and other cryptocurrencies may provide some answers for them.
Whether or not investing in Ethereum is a good fit for you or your business is up to you. It is important to know what this new digital financial and technological system means for the future. There are many uncertainties and caution may be advisable for some. One thing we do know is that blockchain technology is changing the way the world will do business and Ethereum is at the forefront of those changes.