Ethereum uses the same innovative blockchain technology as Bitcoin. But unlike Bitcoin, it’s not just about creating a new network for online payments. The potential for Ethereum goes way beyond that. In addition to running its own digital currency – Ether – it also supports ‘smart contracts’, which are basically agreements written in computer code that sit on the platform and execute transactions automatically when certain conditions are met.
This makes Ethereum a very different beast. As some pundits like to describe it, you could say that while Bitcoin is a new, alternative online payment mechanism, Ethereum is laying the foundations for a whole new internet.Ultimately developers using Ethereum blockchain can create apps and systems in this way that cut out the need for any central intermediary. Imagine, for example, a world where we don’t need the banks to service loans, or estate agents for property, or insurance brokers, or even government departments.
With Ethereum apps, you cannot in theory have one person corrupt, tamper or destroy the data because it effectively exists across multiple places on the network. It can be more secure and there can be zero, or close to zero, downtime.
In its short history, Ethereum has already undergone a major transformation and there are in fact now two strands of Ethereum, known as Ethereum (ETH) and Ethereum Classic (ETC).
The original Ethereum platform split into two in June 2016 when a technical loophole was exposed by a hacker. In the ensuing mess there were two trains of thought as to how to best evolve the Ethereum platform. This created the divergence, commonly known as a ‘hard fork’ in crypto circles. Ethereum Classic, which reasons that the platform concept of complete democracy should prevail, despite risks of attack, has grown much slower than Ethereum, which argues the need to give greater control to a core group of developers.
Whichever broad church of Ethereum you belong to – and many people are happy to sit in both camps – the potential for Ethereum to transform our lives is mind-boggling. No wonder it’s caught the imagination. But remember, the excitement is still firmly focused on its future potential – the realisation of which is a long way off. This makes it incredibly appealing to some investors who may see it as an opportunity to get on board now while it’s still relatively early days and therefore can be purchased at what might be seen as a very low price in five years’ time.