Bitcoin’s explosive growth since it first came onto the scene in 2009 is largely attributed to blockchain technology, which is often praised as the biggest tech innovation since the internet. But now, in 2018, there’s another cryptocurrency in the market with a technology that’s even more innovative.
Unlike Bitcoin’s blockchain, which functions primarily to verify digital transactions, Ethereum’s technology is far more robust, primarily functioning as a platform that supports smart contracts and decentralized applications (dapps).
What are Smart Contracts?
Otherwise known as a crypto contract, a smart contract is a computer protocol that directly controls the transfer of digital currencies or assets between parties under certain conditions. Smart contracts capture the entire term of conditions in code, indicating that certain actions should only be executed when milestones are met. This is a necessary level of protection given that contracts, in their current form, are a flawed way of conducting business.
Take Product Manager Abhishek Chakravarty’s experience, for example. In his Medium article “Prototyping a Blockchain Smart Contract,” Chakravarty describes how he sent a legally binding agreement as a PDF to another party to read and approve, and the other party returned a copy of the executed agreement shortly thereafter. Six months later, after a disagreement surrounding a business issue, Chakravarty went to revisit the contract and realized that, prior to sending him the signed agreement, the other party had significantly modified one of the clauses.
Chakravarty realized, in retrospect, that employing a smart contract would have been far more efficient. The other party would not have been able to change a clause at the last minute if the code had already been preconfigured based on the agreed upon terms. Through the process of coding up clauses and deploying on the blockchain, smart contracts eliminate the need for ineffective and forth communication, reducing ambiguity and boosting efficiency.
What’s more, the benefits of smart contracts go beyond streamlining and improving the process surrounding contract agreements. They also act as the building blocks for decentralized applications, which are rapidly transforming the business landscape as we know it. Let’s take a closer look.
Decentralized applications are applications that run on a peer-to-peer network of computers, rather than on a single cluster of servers. Unlike a traditional web application which calls an API to grab the desired data from a centralized database, decentralized applications call a smart contract, which then connects to the decentralized blockchain. This is important for a number of reasons. Because computation is done at the level of each individual computer (or node), it becomes impossible for hackers to implement the same type of damage that they could be able to do with a centralized server.
In addition to safeguarding against system-wide hacks, decentralized applications remove the need for a middleman and third-party verification, reinstating the values that made Bitcoin such an important innovation in the first place.
Furthermore, like mining Bitcoin transactions, decentralized applications encourage the use of individual and group participation, boosting a sense of community and ownership at the individual level and taking back control from larger, systemic entities.
Programmers are now developing decentralized applications that are built on Ethereum for a number of platforms in a variety of industries. Some projects that are employing decentralized applications within Ethereum ecosystem include, but are not limited to:
- The Vevue Project, a peer-to-peer incentivized video network. Created as a solution to crowdsource more accurate reviews of restaurants, retail locations, and events, users take video clips and answer questions about their neighborhood so that they can earn Bitcoin or Vevue equity tokens.
- WeiFund, a decentralized crowdfunding platform on and for the Ethereum ecosystem, designed to make crowdfunding user-friendly, thoroughly-tested, and interoperable. Users can launch a campaign using one of WeiFund’s smart contract templates. The system also heavily encourages user participation: Through a “bug bounty program,” users are encouraged to find and report bugs and can receive up to $5,000 in ether for their efforts.
Far more than a digital currency, Ethereum, and the smart contract technology and decentralized applications it supports, is improving and transforming the business landscape today.
Diversifying Your Retirement Account with Ethereum
In 2018 and beyond, Ethereum is and will continue to prove itself, not only as the second-largest cryptocurrency but as the basis for a new way of doing business that boosts transparency, security, and individual and group participation. If you’re looking to diversify your retirement portfolio, consider calling Bitcoin IRA to invest in Ethereum. With its multi-use case versatility, and cutting edge technology, Ethereum both already has and will continue to demonstrate its commitment in taking blockchain technology to the next level.