Ethereum (ETH) is a blockchain platform that combines the advantages of blockchain with automatically executable and programmable action chains called “smart contracts”.

Ethereum extends the concept of Bitcoin to include dynamic elements in the blockchain, aiming to become the foundation of whole blockchain ecologies. Today, the vast majority of current blockchain projects do not have their own blockchain but use Ethereum’s blockchain as a basis. In addition, the Ethereum Project has its own crypto currency called Ether (ETH).

Ethereum was conceived in 2013 by Vitalik Buterin, a Canadian Bitcoin programmer of Russian descent, and opened in 2015. It should be distinguished from Ethereum Classic (ETC), from which it split off after contentious disputes among the developers in 2016. The currency unit of the Ethereum Blockchain is called Ether. In the short period of its introduction, Ethereum has been hugely popular with maintainers and users, and its blockchain, with a good 60 gigabytes in size, is today the longest after that of Bitcoin.

How does Ethereum work?

The functionality of Ethereum is best compared to Bitcoin. The blockchain of Bitcoin and many of its imitators is a cryptographically interlaced list of transactions, that is, money transfers. This is the basic structure of each cryptocurrency. On the Ethereum Blockchain, on the other hand, additional dynamic elements are mounted, the so-called Smart Contracts. These are protocols and algorithms that run as Decentralized Applications (DApps) from a virtual runtime environment, the Ethereum Virtual Machine (EVM). The blockchain is thus no longer a mere list of transactions, but now also guarantees the authenticity and correctness of entire automatically running transaction cycles and chains by the cryptographic methods already described. Simply put, DApps and Smart Contracts work like machines that are triggered by a trigger, such as a money order in ether, to perform predefined actions. The variety of applications of this concept is enormous and currently not really manageable.

Potential uses of Ethereum and Smart Contracts:

  • Financial Business & Capital Market
  • Real Estate: Land Registry, Notary Public, Crowd Investing, etc.
  • Political elections and votes
  • energy
  • Logistics & supply chains
  • Insurance
  • Healthcare (Health history)
  • Personality / Identity
  • Cyber Security
  • Internet of Things
  • etc.

Many banks and corporations have already become aware of Ethereum and its Smart Contracts or are already using them.

For example, banks already offer derivatives trading on the basis of Ethereum transactions. However, skeptical voices mingle with the general excitement: smart contracts run in real time across all Ethereum network servers, and can be extremely complex on a case-by-case basis. Added to this is the computational effort for proof of work or mining. Such a system will get considerable problems in the field of performance in case of high popularity by large numbers of users. In addition, many critics doubt that such different things as sports betting, derivatives trading or e-government can be meaningfully and reliably implemented as smart contracts. But regardless of all objections, Ethereum is also a cryptocurrency that is being mined and traded.

Ethereum’s share price performance is extremely dynamic: Already two years after its launch and only two years after the Ethereum Classic split, the ether is well above € 200 (as of November 2018). On the other hand, in the past there have been frequent price falls, which almost devalued the currency within hours, only to return to the old position shortly thereafter. Vulnerabilities can also cause problems: The Ethereum Blockchain makes Smart Contracts available to all subscribers, and security vulnerabilities in their code can be immediately executed, allowing attackers to execute malicious code before the bug is resolved.

In summary, Ethereum is currently perhaps the boldest vision in the world of cryptocurrencies. The application possibilities of the system are not yet foreseeable. The future of Ethereum remains extremely exciting.

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