Ethereum is poised to overtake Bitcoin this year and is changing the way we think about cryptocurrency
Alex Tapscott is the CEO of NextBlock Global
Bitcoin is the mother of all cryptocurrencies and the most famous of them. Developed by a person or individuals under the pseudonym Satoshi Nakamoto, it defined the algorithms that enable the transfer of assets from one party to another without an intermediary such as a bank.
This has helped kick off what we call the blockchain revolution. Yet despite its amazing growth – 500 percent in the last five years alone – Bitcoin is likely to be dwarfed by an upstart named Ethereum, who was developed by a Toronto man in his twenties.
Ethereum’s cryptocurrency has a name – ether – that most people outside of a chemistry lab have never heard of. The total market value of all ethers in circulation is $ 25 billion, not too far below Bitcoin’s $ 42 billion. Ethereum now has “the flipping” in sight, that moment when its value surpasses that of Bitcoin, something that was unthinkable just a few months ago.
Is Ether just riding the Bitcoin wave of popularity as speculators flood the cryptocurrency market? After all, Bitcoin’s value has soared from $ 963 at the beginning of the year to $ 2,550 today, beating my own price forecast of $ 2,000 for 2017.
Perhaps the culprit is Russian President Vladimir Putin, who some believe is buying up ether for himself or even building a digital ruble on top of Ethereum. Those rumors began after Putin met with Ethereum founder Russian-Canadian Vitalik Buterin at the International Economic Forum in St. Petersburg last month. While the meeting may have piqued Putin’s interest – and the opportunities for blockchain and central banks are indeed profound – the headlines in Vanity Fair, Bloomberg, and others about his master plan are likely exaggerated.
Something more fundamental is happening here.
The value of Ether will surpass that of Bitcoin in 2017, not because of speculative mania or Russian intrigue, but because the Ethereum platform has quickly taken the lead as the de facto technology of this new public internet of value.
True, Bitcoin will always be the groundbreaking idea that launched a thousand ventures and sparked the imaginations of tech entrepreneurs everywhere. And there are other exciting blockchain projects such as Hyperledger, an initiative of the Linux Foundation supported by over 200 companies, or Cosmos, which is touted as the Internet of Blockchains – one possibility to unite them all. But at this point in time, it is Ethereum that has the responsibility to bring about potentially radical changes in the economy and society through the blockchain revolution.
We should say that we don’t see Ethereum and Bitcoin as direct competitors here. They meet different needs: Bitcoin is a workhorse of a cryptocurrency, excellent for secure peer-to-peer financial transactions, but difficult to build entire companies on.
Ethereum was designed from the start to enable the creation of software applications that are decentralized – that run concurrently on computers around the world. This could lead to the creation of a new generation of decentralized businesses, networks, and organizations that some believe may challenge the status quo in everything from finance to government, media, and manufacturing.
Today, projects with Ethereum are running with fairly ambitious goals, such as exchanging stock markets through peer-to-peer applications or bypassing Uber and Airbnb through software so that vehicle and apartment owners can create a true sharing economy.
Take a look at Ethereum’s first killer app: ICOs or so-called Initial Coin Offerings. These are basically crowdfunding sales; Investors buy blockchain software called “tokens”. These tokens can represent anything from an interest in a company’s products to a share in future profits.
In 2017, blockchain entrepreneurs raised $ 750 million through these ICOs. About two-thirds of them used Ethereum’s ERC20 token standard, and now the projects and organizations existing on Ethereum are worth billions.
Big business also contributes to the success of Ethereum. The non-profit Enterprise Ethereum Alliance, a consortium of companies working together to develop industry standards, continues to expand the Ethereum network. It has more than 150 Fortune 500 companies, including Microsoft, JPMorgan, and Toyota.
Most importantly, Ethereum has mobilized a massive grassroots community of thousands of developers worldwide.
It would be tempting to write all of this off as irrational exuberance. However, there are more than 875 cryptocurrencies and assets listed on Coinmarketcap.com with an estimated total value of nearly 100 billion US dollars (US).
Technologies like Ethereum face questions about scaling, governance and, given the recent surge in ICOs, whether and how they will be regulated. Of course, these are big questions, but they are not reasons why Ethereum will fail. There are simply implementation challenges to be mastered – and many of them are already being addressed.
At this rate, Ethereum will soon overtake Bitcoin in its value and likely its impact on our world. Is Your Company Ready?
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