It’s no secret that many discoveries were simply stumbled upon. Inventors often seek to solve one problem and bring light to another. Curious as they are though, they always seem to want to find out where things lead and if they get the sense that they’re possibly the first person treading an unknown path, such creators usually return to share an entire new world. The thing about sharing new worlds though is that some of us are comfortable with what we know, some of us are explorers and a lot of us will follow a light if we think it’s worth it.
This article hopes to help relate the common world to the digital world, add momentum to blockchain discussions, to engage the expert, enlighten the newbie and hopefully get a scientist or two to abandon their fear of cryptocurrencies or loosely put- ‘digital cash.’
Originally, money is distributed from a central source. A central bank is responsible for introducing and distributing new money into an economy. The economy then operates around a balancing act between this base money, reserve money, money being utilised by commercial banks as well as all the necessary policies, sales and purchases that occur within the economy.
While economies are geographically distinct, it’s no surprise that the birth of cryptocurrencies within one largely digital world develops to form a network without a central source, a ‘digital economy.’ The good news to users within the network, however, is that there is no one ‘main’ source of information/control house and therefore no way for a hacker to entirely cause ruin.
There are three important features of a cryptocurrency:
- They exist electronically.
- They cannot be redeemed for another commodity. You can’t really exchange Bitcoin for gold, kind of the same way you can’t exchange Monopoly money for real money though somehow it always seemed just as important (with a lot of these childhood banking players actually found trading in real ways today).
- Cryptocurrencies are based on a decentralised source.
But then how do transactions work if there is no trusted middle man?
Cryptocurrencies thrive on the openness of transactions while still maintaining a system of operation. Pseudonymously named programmer, Satoshi Nakamoto, had originally wanted to create a peer-to-peer electronic cash system where all other attempts had failed. To do this Nakamoto opted for a brave risk in a network without one central and trusted source, but one which still relies on operational procedures. Peers continue to expand a network limitlessly, all the while still keeping two important rules of transaction:
- Don’t double spend.
- Verify every entry.
Bitcoin was the first of its kind as a cryptocurrency and here’s how it works:
Within the system that is Bitcoin, exists a ruling system of an encrypted and complex mathematical algorithms. Through the use of encryption, security is maintained. The ledger upon which all transactions are recorded remains a public ledger and is also known as The Blockchain- a continuously growing chain of transaction history and information. A transaction occurs when one peer gives Bitcoins to another peer and the entire network is notified.
After a certain amount of time, the non-reversible transaction gets confirmed and extends the blockchain. The ‘miners’ are those individuals or groups responsible for confirming transactions by using specialised software and receiving a certain amount of Bitcoins as a reward for their skills and the speed at which transactions are confirmed.
Since the creation of Bitcoin in 2009 and its remarkable success by 2016, amidst the Bitcoin craze, several other cryptocurrencies have also been created. Of the lot, about 900 in excess, Ethereum boasts as the latest Bitcoin rival, with the recent Bitcoin failure to expand its network capacity not really doing any favours to help the situation.
What’s makes Ethereum different?
Ethereum expands blockchain technology and is not limited to cryptocurrencies. Russian creator, Vitalik Buterin, designed this similarly decentralised system with the gas ‘ether’ in mind, thus enabling Ethereum to form the ‘fuel’ in modern business enterprise. Where we saw Bitcoin miners mining for ‘coins,’ Ethereum miners are mining ‘fuel’ by expanding upon applications from a decentralised source as opposed to creating more blockchains.
Ethereum is also going further by pushing application development boundaries and making smart contracts (the exchange of anything valuable within business) easier for businesses on a secure global level irrespective of language or currency. Where Bitcoin was digital cash, Ethereum is digital fuel. The fluid and flowing sense this analogy affords Ethereum lends itself well to the rapid growth of this unique blockchain technology. As economies push forth and businesses seek growth, applications enabling easier and efficient processes are ever necessary. Take Provenance for example, through the use of Ethereum blockchain technology, product origins can be easily tracked and provided in a world where consumers want to remain as informed as possible.
It’s important to keep in mind that having only launched in 2015, Ethereum is still fairly new on the market. According to Investing Haven the price of this system will certainly increase over the next 5 to 7 years and if it were to open to the public, there’s no telling the sky rocket levels that can be expected.
Ethereum continues to trade around $225 and a price forecast of $1000 by 2020 has been predicted by both Reddit and Investing Haven, although, an indirect method was used due to a lack of relevant data. A chart analysis would also be unrealistic at this point as Ethereum is still fairly new on the market and has been climbing steadily in an unpredictable future. However, Investing Haven has indicated that the usage of Ether tokens does offer a good indication of the ‘real intrinsic value of Ethereum.’ They’ve determined a price forecast of $1000 by 2020 due to the demand and investment outlook on Ethereum.
The price forecast for Bitcoin in 2020 is relatively higher as analysts suggested this could be well over $10 000 although as Ethereum is still closed to the public with many applications remaining private- data isn’t easily available and the future could bring a surprise or two.
Investment value increased when Mastercard, QIWI and Cisco joined the Enterprise Ethereum Alliance (a group specifically catering to large companies) with companies already part of EEA including Toyota and Microsoft. This steady incline in investors has seen over 86 major firms join the EEA this year and the use of this cryptocurrency now cuts across a wide variety of industries, from banking to hardware and pharma- if that’s any indication of the diverse assortment of prominent investors eagerly using ether tokens to do business.
In the video below CNBC covers the basics about the two, currently leading, cryptocurrencies and though there’s always the risk of market slides, both Bitcoin and Ethereum have experienced such plunges and always bounced back considerably.
How to keep your currency?
Digital wallets are a useful way to store and complete cryptocurrency transactions. Wallets are used by public and private ‘keys’ to interact with various blockchain networks, transact, as well as view balances. There are five types of wallets:
- Desktop wallet- this type of wallet can only be accessed from one computer/laptop and is vulnerable to hackers if a virus attacks the device.
- Cloud wallet- this is an online wallet that only uses private keys
- Mobile wallet- this wallet can be downloaded from an app store and allows easy access by using a simple interface due to its mobile nature
- Hardware wallet- this type of wallet is great for storing transactions that might have been conducted offline and provide secure access.
- Paper wallet- A paper wallet is an actual print out of public or private keys and is secure provided the printouts are all kept safe.
While there are many wallets to choose from the three main factors you might want to consider when choosing an online wallet are:
- Private Keys: Are you able to control your keys or is only your server allowed to do this?
- Compatibility: Are you able to store and transact using different currencies?
- Restoration: Are there any backup features available?
Jaxx is a firm online wallet favourite by many users and it provides an especially intuitive and understandable interface. When you register with Jaxx you will not need to provide personal information, though their security is very good and private keys are not shared with the server. Jaxx also supports different cryptocurrencies including ETH, continuously checks wallet application to remove friction points and it is available for download from your Google Playstore if you use Android.
MyEtherWallet is another very popular online wallet amongst users and has a unique BTC and ETH swap option. Just like Jaxx, you will not need to provide your personal information and you can write small contracts easily with this open-source wallet.
The cryptocurrency market moves at a rapid speed as is expected from a new-age digital economy. Since the creation of Bitcoin there hasn’t been much serious competition until now, with Ethereum entering the market and seemingly developing a unique path for itself. The future of these cryptocurrencies could turn out to be the digital story version of the Tortoise and the Hare and with no failure forecasts for both market leaders- the quiet Ether tokens could certainly surprise us all and prove to be a consistent contender for a long time to come.
Article by Melita Vurden