Is Ethereum a Good Investment?
Well, that is a good question and though the internet may not be the best place to get advice, you might want to do some research yourself. With the advent of many other digital currencies and storage mediums such as the Bitcoin (BTC), Bitcoin Cash (BTC), Ethereum (ETH), there is stiff competition in the market among these players. While Bitcoin is the number one digital currency on earth, Ethereum is not far behind as well. So why are these currencies getting so popular in the current financial market scenario?
There is a reason for everything and there is a good reason behind the rise of these digital currencies. The internet today is the storehouse of every little thing that you can imagine. It is the internet that stores every little ounce of your personal data that you ever thought you had. Right from your social network accounts, your passwords and every little detail of your business and financial information are largely stored online in remotely based servers owned by Technology giants such as Amazon, Google, IBM, etc.
Though this facilitates a lot of convenience on your business and financial transactions, it has its own vulnerabilities as well. It has been proved that the Government can use their influence to access all of this centralized data without your knowledge leading to invasion of your data security and privacy. Hence, decentralization was the only solution and this digital medium of financial transactions came into existence to facilitate as decentralized storage and exchange mediums free from Government control.
While BTC is known to disrupt the online banking system with the convenience and the ease they offer, Ethereum aims at creating a blockchain to replace all the third parties that store your complex financial instruments and other sensitive data.
Let’s find out more about Ethereum.
What is Ethereum?
Ethereum is basically a platform that is available freely on the internet as an open-source option with a mission aimed at inspiring and building the decentralized applications of the future. In simpler terms, the applications built on Ethereum Network would not involve anyone in the middle. It will facilitate safe and seamless interaction of the users with the social and the complex financial systems thereby opening a universe of opportunities for creating decentralized development on the exchange value.
The mission that Ethereum envisages is to become a World Computer that would totally decentralize and in other words democratize the existing model of client-server computing. With Ethereum, clouds and servers are being replaced by thousands of nodes that are being run by local volunteers worldwide. The vision is to enable the functionalities for people globally to access, use or offer the services residing right at the top of the infrastructure.
In the current scenario, a typical app from the app store would completely rely on a third party company or a service for storing all the sensitive financial information such as credit card information, buying history and other sensitive personal data. And subsequently, all the control of the information is with the administrators of this third-party service.
Ethereum through its attempts is trying to return all the control of data to the owner itself. So with Ethereum only you will be able to access, control and make changes to your own data and not any other entity. Within the Ethereum network, developers will be able to develop and host their applications through complicated blockchain technology and everyone will have the rights as an author and a creator of your own application.
Let’s look at the working of Ethereum in a little detail.
How Does Ethereum Work?
Ethereum borrows most of its working model from the Bitcoin blockchain design with a major tweak that supports applications beyond the financial ones. Ethereum, as we saw earlier, does not have anyone centralized entity controlling or storing information rather data is being replicated to all the nodes in the Ethereum network. It empowers the developers to agreements and applications with additional steps that define new ownership rules, different state transfer mechanisms, or alternate formats of transactions.
And how is it done? Ethereum is based on “Smart Contracts” and that is something that sets it apart from others. Developers in particular love this concept of a smart contract where all they create is digitally contracted and self-executed as in a Virtual Automatic Vending Machine.
So what is a smart contract? It is a digital contract or agreement between a couple of parties in which the tool used or the underlying technology handles the performance, management and the payment in the contract. The smart contract involves its own Bank Account where the currency used is ETHER where when the service is used or delivered to an intended party deposits happen automatically. This means minimum work, seamless payment processing, and efficient data tracking.
The Ethereum platform allows developers to create their own versions of smart contracts or the autonomous agents as per the Ethereum White Paper. The platform uses a Turing Complete’ programming language which supports a broad set of instructions. The Smart Contracts on Ethereum can:
- Function as accounts that need multiple people to agree for funds to be spent (multi-signature accounts)
- Manage all the agreements between the network users
- Act as a utility for other agreements and contracts (like a software library)
- Store all important information about an application such as domain and other registration information and membership records.
This would imply that one smart contract would need assistance from other smart contracts. For instance, if someone bets on the temperature on a summer day the smart contract will trigger another smart contract that determines the weather and the temperature outside and a third smart contract can settle the bet. And running each contract would need ether transaction fees to be paid depending on the computational power needed. But to run a smart contract code in the Ethereum network when a user with another contract sending a message has enough ETHER in their account wallets to pay for the transaction fees.
Some Examples of Smart Contracts
One area that Ethereum has recently touched and capitalized on is the Music Industry. The beginning of the internet era had hugely disrupted the music industry. Internet up until recently had fixed the royalties and earnings of songwriters and composers based on the streaming and viewing numbers which does not make too much sense especially when your song is a super hit. As such musicians started looking for other ways and means to generate revenue.
As a result, developers are now making music applications by using blockchain technology such as Ethereum to create those revenue-making opportunities that were never there. Many music applications are now being developed for musicians to reclaim and earn revenue with their already existing content. How is it done? You guessed it right. Smart Contracts come into the picture again. So what is being done now is that their music is now being tagged with smart contracts which protect the intellectual property rights and ownership interests of the user?
So now if you want to listen to the song, it may be free or costs a few pennies to download. You wish to put the song in your video or your movie? You can happily do it but after paying a price that is presented at the point and time of purchase which would be based on the smart contract containing the IP rights for the use and replication of the piece of music in question.
Musicians across the world are totally excited about this development. Because now their song has become a business with a steady flow of revenue years after it was actually released. This means a star of yesteryears can cash in on what he created in the past without doing absolutely nothing today. The song would be right there on the platform, doing the marketing by itself, protecting the musician’s rights and also creates all the revenue that flows back to the musician. In a way, they control the industry directly rather than the physical intermediate institutions that exist.
Apply the same concept to all other areas and fields of work where people do not get all the due compensation for all the work they do because of all the greedy intermediaries in between that control the market. It can be anybody who creates original content, art or makes scientific innovations or inventions or independent journalists. There are endless such domains and industries where people usually do not get a fair share of the compensation and Ethereum can benefit hugely.
Some Other Examples
There are many other areas where Ethereum and the underlying smart contracts can be used for managing the transactions between parties and a group of parties. Some of the areas include:
Payment of Workers:
Ethereum can be used to pay the workers on an hourly basis by getting them to log their hours on the blockchain and then after the smart contract verifies their rates and times logged the funds can be instantly transferred in their accounts that they can withdraw at any point in time. This avoids the huge investments and HRMS setups that are required to log, track, calculate, process and remit the due amounts. Thus eliminating a lot of unnecessary processes that delay the entire payment cycle. If all goes well, this is definitely going to revolutionize how companies and organizations use to pay their salaries.
Import and Export of Goods:
Many times traders are always at risk when their buyer or the seller is not locally based. There is always an underlying fear that the seller might not despatch the goods upon remitting the payments or the buyer may not pay the dues upon receiving the goods. With smart contracts and the use of Ethereum network, buying and selling of goods from anywhere across the globe can be seamlessly tracked. To begin with, both the buyer and the seller should have wallet balances so when trading on the platform both know that both have the money to pay for the transaction. And then when the purchase happens the balances are auto-debited from the buyer and auto-credited to the seller. Thus no riks and no chances of fraud.
Foolproof Property Transactions:
Property transactions involve a hell lot of money. So when the parties involved agree or finalize on the deal, smart contracts on the Ethereum network will work just fine. So there is absolutely no need to carry all those bags stashed with money which can be a security concern as well. Just place the deal on the network and let it handle the transaction with the preset conditions. Based on how the contract is written your funds for the deal can be auto-debited and transferred to the seller party when certain conditions such as the completion of the transfer of ownership and the likes are being uploaded to the network.
Apart from the above, every other industry or an area where there is a contract in place, there will be a huge space and potential for Ethereum to handle things single-handedly.
What we saw from the above it is not difficult to establish the immense scope and potential of Ethereum. It can simply revolutionize every area and domain of work if used in the right way and in the proper manner. And whether it is a good investment then?
Of course, it is!! If you want your business to work efficiently without any unnecessary intervention or dependency on third parties, then it sure is the best investment. If you want to establish a business, transactions and payment ecosystem that works on its own then investing in Ethereum is undoubtedly the wisest step you can take. With so many uses that it offers and with so much of disruptive potential it has Ethereum and the blockchain ecosystem as a whole seems to be the big bright future of businesses and transactions in the real world as we know them today.
Sooner or later the world would be looking up to and shifting paradigms to this amazing technology.