How Ethereum Works: It Seems Like We’re Living in a Futuristic Alternate Universe
How Ethereum Works: It Seems Like We’re Living in a Futuristic Alternate Universe
The world is changing so fast that it’s tough to understand where the crypto revolution is going, but Ethereum will be part of that story.
Photo courtesy of Pixabay
It’s already a mad, mad world; add cryptocurrency, and it seems like we’re living in a futuristic alternate universe. It appears that new crypto technologies are popping up every week, and more people are becoming accustomed to investing money into digital coins. But what many of us don’t understand is that blockchain—the man behind the curtain of crypto—can be used for purposes beyond our current imaginations, the second-most-popular platform being Ethereum. Recently, the ether coin reached an all-time high of $2,200. But before we dive into Ethereum, let’s do a recap on how blockchain works.
Blockchain is revolutionary because it’s a decentralized technology that isn’t backed by a central authority. It’s a type of database that stores information; specifically for Bitcoin, it reserves the comprehensive history of Bitcoin transactions. This coin has been making headlines because of its institutionalization by everyone from Elon Musk and governments to banks and politicians—not to mention its skyrocketing value. Blockchain is difficult to alter, so that’s why it’s used in the digital currency space.
The cryptocurrency revolution is already affecting the way we live, how we view the world and—more fundamentally—the way our economy works. As of now, our economy depends on institutions for transactions. So, if you go to the store and buy something, it’s with cash that’s originated by a) the Federal Reserve or b) a credit card that uses U.S. dollars. And you have to go through a bank, so, at every transaction, there’s a touchpoint between centralized institutions—public or private, whether they’re governments or banks. The thing about cryptocurrency is it doesn’t depend on central players to get business across the finish line.
A lot of the news focuses on Bitcoin, but it’s just a currency. In December 2020, the World Economic Forum released a report titled “Crypto: What Is It Good For?” and they didn’t focus on Bitcoin. There are new emerging players.
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The biggest story you’ve never heard of is Ethereum. It’s more advanced than Bitcoin in the sense that it’s customizable and open source. It can be used in such a vast capacity that we don’t know the extent of its possibilities. Ethereum is the new kid on the block.
Ethereum has a decentralized finance (DeFi) system, and it powers its own digital currency: ether (ETH). But according to their website, Ethereum builds upon Bitcoin’s innovation. Ether is the “gas” that “fuels” the network which is a programmable blockchain. Our world’s brightest minds can come up with endless possibilities for this technology; you can even use it for Bitcoin. It also runs thousands of decentralized applications (dapps).
Bank of America recently stated that “Bitcoin is the most talked about cryptocurrency, but Ethereum [the blockchain] has more features, including being more flexible,” according to CoinDesk.
Ethereum is much more flexible than Bitcoin because it’s not just a coin. The platform calls itself a “marketplace of financial services, games and apps that can’t steal your data or censor you.” One example of an Ethereum application is the use of non-fungible tokens (NFTs). Any of your assets can be tokenized, like how Kings of Leon sold their latest album.
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And they extend an open invitation to all of the coders and programmers out there.
“…[E]verything here is open-source and ready for you to extend and improve,” they stated.
So, get ready to learn some new vocabulary and adjust to new technologies in every facet of life. Bitcoin isn’t the height of blockchain technology. NFTs and DeFi aren’t the most advanced applications we will see. The world is changing so fast that it’s tough to understand where the crypto revolution is going, but Ethereum will be part of that story.
David Grasso is the host of the Follow the Profit podcast, where he shares simple ideas for financial success and lessons learned the hard way. He is also the CEO of Bold TV, Inc, a nonprofit media company dedicated to entrepreneurship and cultural empowerment.
Hannah Buczek is the managing editor and journalist for Bold TV. She also reports and edits for GenBiz, a nonprofit media brand focused on promoting financial freedom.
If You Bought $100 Worth of Ethereum at the Start, Here’s How Much You’d Have Today
Digital currencies have surged this year. But what if you’d invested much earlier?
It’s always fun to play the “what if?” game with investments, especially when top cryptocurrencies have soared in value since being launched. If that’s something that intrigues you, keep reading to see how much you would have made if you’d invested in Ethereum from day one.
What is Ethereum?
Ethereum (ETH) is the world’s second-biggest cryptocurrency, behind Bitcoin (BTC). It was launched in July 2015 and first traded on August 7 for $2.77. The next day, the coin’s value had fallen to $0.81. It remained under $1 until January 2016.
So, if you’d spent $100 on day one, you’d have 36.1 Ethereum tokens. As I write this, (April 21), each token is worth about $2,420 – so those 36.1 ETH tokens would be worth $87,362.
Bear in mind, the price of digital currencies has made an incredible jump this year – Ethereum is up almost 300% from Jan. 1 alone. But even without that leap, if you’d bought Ethereum at $2.77, you’d still be doing well.
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So, if I’d invested $100, I could have over $80,000 now?
In theory, yes. But life doesn’t usually work out that way.
The challenging thing about cryptocurrencies and other new investments is that with the benefit of hindsight, we’d all have bought Bitcoin or Ethereum years ago. We’d have invested in Amazon back when its IPO was $18 a share as well.
The Ascent’s parent company, The Motley Fool, holds Bitcoin. It does so because it believes it is a solid long-term investment.
What does that mean at a practical level? If the value of Bitcoin falls dramatically tomorrow, The Motley Fool will feel comfortable holding because it has analyzed the digital currency and sees extended value in Bitcoin. So when prices drop, it can wait patiently until the value rises again.
But putting money into a project when you don’t fully understand the fundamentals in the hope that it might be the next big thing is closer to gambling than investing. Added to which, back in 2015, we didn’t have as many secure cryptocurrency exchanges or protections as we do now. Your Ethereum could have been stolen by hackers or taken by scammers.
What if you’d chosen to invest in a coin called GetGems (GEMZ) instead? GetGems was a decentralized media messaging app that launched in April 2015. Users could send Bitcoin via the app. If you’d put your $100 into GetGems on the same day Ethereum launched, you’d have been able to buy 6,250 GetGems (they were worth $0.016 on Aug. 11). It peaked at $0.058 in May 2017 – when your investment would’ve been worth $362.50 – before ceasing to trade altogether. In the end, you’d have lost your money.
Looking forward
It’s easy to look back and wish you’d bought Ethereum six years ago, or even six months ago. But if you didn’t, there are still plenty of opportunities. The important thing is to invest for the long term – look for stocks or cryptocurrencies that you believe are good, lasting investments.
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Cryptocurrencies are unregulated and can be extremely volatile. That means there are higher risks, but also higher rewards. The meteoric jump we’ve seen in recent months has raised concerns about a crypto bubble and fears it might burst. But if you see potential in this new technology, you’re less likely to get burned by a steep price drop – as long as you don’t invest any cash you’ll need in the short term.
It isn’t easy. Buying individual cryptocurrencies – like buying individual stocks – takes time. A lot of investors stick with mutual funds, ETFs, or index funds because they don’t want to, or aren’t able to, research each investment. Instead, they choose a fund, sometimes one with a fund manager, so they can balance their portfolios and risk levels.
But the SEC has not yet approved any cryptocurrency funds in the U.S. As such, the onus is on us as individual investors to work out which cryptocurrencies to invest in. And if you’ve never invested before, that can be daunting. An alternative would be to look for funds that center on blockchain or crypto-focused companies.
Whatever you decide to do, try to think long term. Nobody wants to take on debt in three months because they gambled on crypto and lost.
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The price of Bitcoin enjoyed a rise on Monday, surging by 10 percent having endured a big slump after reaching an all-time high just a couple of weeks ago. It saw $15,000 (£10,800) knocked off its value, and fell below $50,000 (£35,000) for the first time since March. It is currently trading at £39,000, a slight uptick from where it has been this week. This comes as many fear the US Government could hit Bitcoin with regulations due to environmental concerns.
One expert believes that attention will soon turn to another crypto asset – Ethereum. Ethereum has bucked trends in recent weeks, hitting a record high last week thanks to a “perfect storm”. It reached each above $2,600 (£1,873) on Thursday - the first time in its history - after trading below $200 (£144) only a year ago. One expert claimed this week that Ethereum has more potential than the more established Bitcoin, and could even surpass it in value in the next few years. eToro analyst Simon Peters told Crypto AM: “Ethereum could certainly challenge Bitcoin for the number one spot among cryptoassets in terms of market cap, but it will be a few years yet before this could potentially happen. “We must remember both tokens were created for different reasons. Bitcoin is a decentralised currency and Ethereum is a platform to build decentralised apps that make use of smart contracts.”
Crypto news: Ethereum could have more potential than Bitcoin
Crypto news: Ethereum is at an all time high
He added that Ethereum’s value looks set to rise at a quicker pace than rival crypto assets, and that it has more potential for use in the “real-world” than Bitcoin. Mr Peters added: “At this moment in time, Ethereum arguably has more potential for more real-world applications, prompting a wider ecosystem than Bitcoin. “Currently, plenty of DeFi applications are being built such as Uniswap, MakerDAO and Chainlink to name a few, as well as supporting smart contracts and NFTs. “Granted, some of Ethereum’s success can be attributed to Bitcoin and the interest in crypto assets it has created. “With far more activity and increasing numbers of users projected for Ethereum, thanks to the number of applications being built on it, I expect it will cause the overall network value to increase, and, in turn, the price of Ether could increase at a quicker pace.” READ MORE: Bitcoin resurgence: Crytocurrency to reach $250,000 value ‘by July’
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Mr Peters also explained that Bitcoin has had a six-year head start on Ethereum, with the latter sitting at an astounding value of tokens mined. He added: “If you look at where the market cap of Bitcoin was six years ago it was approximately $5billion (£3.6billion), whereas Ethereum at a similar point in terms of its life cycle (six years since launching) has a market cap of $300billion. (£216billion). “While the two have traded in tandem for much of the last three years, as the crypto asset market starts to mature, investors will be looking across the broader spectrum of assets and assessing which has the best long-term potential. “Bitcoin has captured the attention of millions of investors, but Ethereum offers an alternative. With Ether’s dollar valuation significantly lower than Bitcoin, it also appeals to investors who want to own whole coins, something which is now far more expensive to achieve with Bitcoin. DON’T MISS
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