Ethereum: Evolution of the Blockchain

Many consider Bitcoin a major innovation for the financial industry, due to its use of the blockchain. However, Ethereum is an innovation of the blockchain itself, with several different usages, including a cryptocurrency. While the fall in the Ethereum price over the past three months has amounted to about a loss of 35%, Ethereum cannot be seen as just a cryptocurrency. Ultimately, it is one of the most unique blockchains in existence, and it has the potential to radically alter business transactions.

Ethereum is a blockchain-based software application, which builds from the basic blockchain technology used by Bitcoin. While the Bitcoin blockchain confirms monetary transactions, Ethereum’s blockchain puts data to work at the behest of the user. Instead of only confirming the amount of data/cryptocurrency sent by one user and received by another, the Ethereum blockchain can also command that data to go another place, or split it up between multiple destinations. In short, the Ethereum blockchain can receive one input, and apply that to several outputs. While miners who confirm all transactions are awarded a coin known as “ether”, Ethereum is more than a cryptocurrency.

Perhaps the most popular application of the Ethereum blockchain is the ability to create and execute smart contracts. Parties agree on contractual terms, and those terms are written into the Ethereum blockchain. Once a party fulfills a requirement, it is again recognized on the blockchain, triggering an output. Like the concept of bitcoin, the miners verifying this process will receive payment in the form of a cryptocurrency, in this case, an “ether”. Another key feature of Ethereum is its simplicity. Anyone can create a smart contract on the Ethereum blockchain after having downloaded and installed the proprietary Ethereum browser, Mist, to their computer. Thus, those utilizing the Ethereum blockchain can tailor efficient contracts to their needs without the use of technical coding.

It’s not just individuals who are using the Ethereum blockchain. While there are several companies currently using Ethereum blockchain technology in one way or another, some giants stand out: JP Morgan Chase, Microsoft, Starbucks, and Amazon. JP Morgan Chase developed its unique virtual coin to conduct cross border transactions using the Ethereum blockchain. Microsoft built its Azure cloud computing services on Ethereum. Starbucks is planning on using the smart contract feature of the Ethereum blockchain to track coffee bean origins, proving to customers they provide ethically sourced beans. Finally, Amazon Web Services (AWS), another cloud provider, has integrated the Ethereum blockchain into its products as well.

Although a major hack of an organization built on Ethereum known as DAO in 2016 resulted in both a $50 million heist of ether and the price of an Ethereum coin falling by 20%, the hack exposed a flaw in the coding of a contract, and not the Ethereum blockchain itself. The founder of Ethereum, Vitalik Buterin proposed an effective solution, recovered the DAO’s ether, and made other changes to applications of code to the Ethereum blockchain, thus safeguarding it from future attacks. What’s more, this incident happened before Microsoft, JP Morgan, Amazon, and others adopted the use of Ethereum for their operations. Thus, the DAO hack demonstrates Ethereum’s ability to pass a stress test.

Ultimately, with so many reputable companies adopting it, a minor fall in Ethereum’s price will not dissuade more users from adopting it in the future.

 

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