Almost everyone has heard of Bitcoin. Ethereum on the otherhand is not as well known. For those who are less technically inclined, it’s also harder to wrap your head around some of the concepts. I wanted to share with you a brief overview of the technology and possible opportunities in making money:
What is Ethereum
Ethereum is an open source platform that uses blockchain technology. Developers can build software applications that run on the Ethereum network. Bitcoin is also based on a blockchain but it has one specific purpose – to be used as a currency.
Applications that run on Ehtereum are decentralised and therefore can’t be censored or blocked or interfered with by third parties.
Applications that run on Ethereum are powered by Ether. Think of it as fuel. Ether is paid to the computers that are running the application as a reward and is used to pay transaction fees.
Applications that run on Ethereum are called smart contracts. The entire state of the application is stored in the blockchain. The easiest way to imagine this is looking at your own computer. There are probably a bunch of applications installed on it, including the web browser that you are using to look at this page. That web browser is installed and running using resources on your computer. On Ethereum a similar application or smart contract, is running across the blockchain and is decentralised.
What applications are being built on Ethereum
At the moment, Ethereum is still in it’s early days. It’s still unknown exactly what will be built using the platform. I’d like to think that any application that needs to be provably transparent or applications which are powered by a community rather than one person will do well on Ethereum. At the moment, the processing power of Ethereum has technical limitations, and whether these can be solved in the future will affect what can be built.
But here’s a thought experiment – it’s possible to build another cryptocurrency (such as bitcoin) on top of Ethereum. If you realise that sort of power, it starts to make more sense. Imagine a piece of software that couldn’t be hacked, taken down by the government, and owned by anyone who wanted to own a piece of it. That is what the future of Ethereum could look like.
Can you trade Ethereum like Bitcoin
Yes! Ethereum can be traded a exchanges, but you can also trade it as a CFD. This way you can profit from the movement of Ethereum (and it does move a lot!) without needing to own the underlying asset.
Going Long on Ethereum
I believe Ethereum is only in its very early stages of progress. Think 0.1% of completion. The upside is huge and could change the way software is written, how companies are owned and how economies work. So i’m going long on the technology. This could be like getting in on bitcoin before it was being used. Of course there are lots of risks, but I’m willing to balance those against a possible computing revolution.