What Is Ethereum?
Ethereum is a open software platform. It is built on blockchain technology.
The main purpose of Ethereum is it allows developers to build dApps (decentralised apps). Think of these as normal apps that you have on your iPhone, but governed by a group of normal people (like you and I) rather than a single corporation.
In the same way, you can think of Ethereum as a blockchain version of iOS or Android. Ethereum serves as the platform, and then the dApps are built on top of it.
At its launch, Ethereum's point of difference was its smart contract capability, which means it is able to execute contracts based on certain mathematical and logical conditions. For example, "IF the deposit is received in the account, transfer title of the property to Mr X". The long term idea for this is to remove the need for intermediary third parties (typically lawyers or the government). Two people should be able to do transactions privately between each other, without the need for a neutral party to ensure trust.
Ethereum is currently the biggest dApp platform in the world and was launched by Vitalik Buterin, one of the foremost experts in the cryptocurrency space.
The Ethereum Team
Ethereum is headed by Vitalik Buterin, one of (or possibly the most) recognised name in cryptocurrency today. He released the Ethereum whitepaper in 2013 and has been spearheading the project since then.
He currently heads the Ethereum Foundation, which focuses on research and new developments to be implemented on the Ethereum platform. He is very active on Twitter.
So who is actually building Ethereum?
That should be an easy question to answer, but it isn't.
For one, there is no Team page on the Ethereum website.
All we know are the few figures that head the non-profit Ethereum Foundation, which is continually changing. See the current team here.
However, one thing to understand is that Ethereum is open source and public, so it has a large and ever changing group of researchers and developers building the platform at any one time. The Ethereum Foundation sets the vision, but it is this team of developers that write the code.
The Ethereum Product
Ethereum was the brainchild of Vitalik Buterin, who wrote and released the Ethereum whitepaper in 2013. An extremely successful ICO followed, which raised $16 million.
Ethereum was a unique concept when it was released because it allowed the development of third party applications on-chain. While blockchains in the past were only able to serve one purpose (such as Bitcoin serving as peer to peer money), Ethereum proposed a blockchain where developers could literally build whatever they wanted.
Since Ethereum's launch in 2015, thousands of dApps have been built on top of it. Again, you can think of Ethereum as Apple's iOS and the dApps as all the games and applications that run on the iOS system.
Ethereum is currently secured using a proof of work algorithm, meaning coins are mined in a similar way to Bitcoin. However, Buterin has stated almost since the beginning that he intends to move the platform to proof of stake. They are currently developing Casper, the proof of stake protocol that Ethereum will eventually shift over to.
The Ethereum Token (utility and metrics)
- 72 million Ether was premined at launch.
- 60 million of them were sold to investors during the ICO.
- 12 million (17%) were retained in a development fund, most going to early contributors to the network and the rest going to the Ethereum Foundation.
- There is no hard cap.
- New Ether tokens are generated on the network via mining, similar to Bitcoin. It uses the Ethash algorithm, which makes it less susceptible to large mining pools that are seen in Bitcoin.
- Newly mined Ether is capped at 18 million per year.
- As of December 2018, Ether's total supply is a little over 100 million, meaning 28 million new Ether has been mined since launch.
All dApps built on Ethereum require transactions or "traffic" on the Ethereum network.
To pay for this traffic, users need to pay a fee known as "gas".
Gas is payed with the Ether token (ETH).
Users can either buy tokens on the market, or join the Ethereum network as a miner. Miners earn ETH both by collecting gas payments and via mining.
As long as there are dApps using the Ethereum network, the ETH token will have utility.
The Ethereum Community
Ethereum is open source and development is coordinated by the Ethereum Foundation.
Ethereum also has extremely strong support from the corporate community. In early 2017, the Ethereum Enterprise Alliance (EEA) was formed to develop Ethereum into a global, enterprise level platform. Some of the biggest companies in the world are now members of the Alliance, including Toyota, Samsung, Intel, Microsoft, JP Morgan, ING, Cisco, Mastercard, Scotiabank and many more.
B Money Verdict:
Overall, Ethereum is one of the safer investments in the space, due to heavy involvement from corporations (such as IBM, Amazon and Microsoft and the rest of the EEA).
The fact that it is used so widely already gives it a serious head start on new blockchains being developed today, even though you could argue many of the new chains emerging right now are faster, leaner, cheaper and so on. However in cryptocurrency, one of the key factors is adoption. First mover advantage increases odds of a good return exponentially.
The shift to proof of stake should be a catalyst for a large increase in demand and value.
Vitalik is one of the most recognised experts in the space and is largely involved in the tech side rather than the investment side. Good news for investors as his focus will be on developing the product. Other high-level developers such as Joseph Poon are also strongly connected to the project.
Main competitors are well marketed chains such as NEO, TRON and technically advanced chains such as Cardano, EOS, and to a lesser extent, Ethereum Classic. Ethereum is clearly the front runner though. If you want to invest in platforms, Ethereum is the highest probability bet in my opinion.
One risk factor is token metrics. No hard cap on a project is never good. Inflation cap is sometimes a sufficient alternative, although Ethereum's current inflation cap sits around 18% of total supply. The shift to proof of stake will be a large improvement for metrics.
THE GOOD STUFF
- Second largest cryptocurrency by market cap.
- Backed by the Ethereum Enterprise Alliance, consisting of some of the biggest corporations in the world.
- Large developer community, headed by Vitalik Buterin and Ethereum Foundation.
- First mover advantage.
- Already widely used.
THE BAD STUFF
- Has shown scaling issues in the past, and is foreseen to continue into the future.
- Success might be weighted too heavily on one person (Buterin).
- Fees can be expensive.
- First mover advantage also means other chains have had the benefit of watching and learning, and launching faster, more scalable platforms.
- Token metrics not great.
Overall, Ethereum is one of the safer investments in the space, due to heavy involvement from corporations (such as IBM, Amazon and Microsoft). The fact that it is used so widely already gives it a serious head start on new blockchains being developed today.
Open source development. Vitalik is one-of-a-kind. Strong founding team. Could be more transparent.
Can be expensive. Had to fork twice. First mover means mistakes are inevitable. Gas system is confusing.
All activity requires gas, meaning token has high and essential utility. Proof of stake will be major value add and would increase this score. Metrics are so-so.
Ethereum Enterprise Alliance is a game changer.
How To Buy Ethereum In New Zealand
We recommend buying Ethereum in NZ through Easycrypto.nz. They are a full service online cryptocurrency broker, owned and operated in New Zealand. Buying with Easycrypto is slightly more expensive than Independent Reserve but the process is much easier and faster for NZ citizens. You can sign up for your free account here.
For a step-by-step guide, check out our blog post How to Buy Ethereum in NZ.
BUY WITH NZD: EasyCrypto or Independent Reserve