What Is Ethereum?
Ethereum is a custom-built blockchain that runs decentralized applications (Dapps) exactly as programmed. This means there is no downtime, censorship, fraud, or third-party interference. Ethereum applications are called smart contracts. To know more and find answers to questions like, “What is Ethereum” or “What are Dapps?” check out our detailed Ethereum info here.
What Is Ethereum’s Intrinsic Value?
People’s interest in Ethereum can be gauged by the number of searches for “What is Ethereum’s Intrinsic Value?” Given that Ethereum was selling for less than $10.00 at the beginning of this year and is now over $400.00, the fact that Ethereum has been lauded as the future of cryptocurrency tells you a lot about its intrinsic value.
How Do Smart Contracts in Ethereum Work?
Before I explain how smart contracts work, you should know that a smart contract cannot be changed, by anyone, at any time, anywhere. Smart contracts help you exchange anything of value—property, shares, money—in a transparent way without the services of a middleman.
The best way to describe how smart contracts work is to take the analogy of a vending machine. Just like you drop a coin into a vending machine to get a product, you drop an ether (Ethereum coin) into the ledger (the cryptocurrency vending machine) and get your contract almost instantly. And you do this without a lawyer, a notary, or any other middleman.
Smart Contract Example
Let’s say Jack has to rent an underground parking space from Bill. Jack pays the ether coin to the ledger (Ethereum blockchain). Jack gets a receipt that’s held in a virtual contract. He will get a digital entry key by a specified date. If Bill does not send the key by the specified date, the blockchain releases a refund to Jack.
But if Bill sends the digital key before the specified date, the contract holds. On the specified date, the blockchain releases the funds to Bill and the key to Jack. Because the system is witnessed by hundreds of people, there is faultless delivery. (Source: “Smart Contracts: The Blockchain Technology That Will Replace Lawyers,” BlockGeeks, last accessed December 5, 2017.)
This is just one example of how to spend your ether. There are tons of different uses of ether and smart contracts ranging from property law to financial derivatives, insurance premiums, credit enforcement, legal processes, breach contracts, and even crowdfunding agreements. Once you start using one of these services, you can discover a network of businesses that accept Ethereum.
Ethereum Smart Contracts’ Value in Businesses
Ethereum has enormous potential. Early adopters are already noticing the value of Ethereum for businesses. Here are four examples of how people use smart contracts to drive innovation to a whole new level.
1) Increase Protective Measures Around Online Consumer Data
One of the biggest concerns in today’s digital landscape globally is identity theft. In an effort to grab the identity theft bull by the horns, a company called KYC-Chain is using Ethereum to help its clients get new customers safely.
By adding KYC (know-your-customer) regulations to simple identification processes, KYC-Chain gives customers the solution to share only necessary information and thereby protect their identities better. (Source: “Business in the Age of Ethereum,” TechCrunch, June 4, 2017.)
2) Boost Crowdfunding Capabilities and Transparency
Today, entrepreneurs and businesses are increasingly relying on public support to raise funds through crowdfunding via platforms like Kickstarter and GoFundMe.
The way crowdfunding works ordinarily is that if project goals are not met, the money is refunded. Now, a company called WeiFund is taking it one step further. WeiFund’s platform uses Ethereum’s Smart Contract capabilities so individuals can contribute to development with a lot more confidence because there is complete transparency and a strict adherence to contract boundaries.
3) Making a Decentralized Global Workforce a Reality
Ethereum can help budding entrepreneurs build like-minded teams based on democratic shareholder voting. Because the entire team has access to the latest updates and initiatives, and because all initiatives are automatically executed within the contract, there is no burden of managing an organization and answering to shareholders.
Colony is one platform leveraging Ethereum to simplify the management of a distributed workforce by stripping away organizational hierarchy. The system, run on Ethereum, assesses the value users contribute to the platform. Based on the value and completed tasks, users are awarded tokens automatically. The idea is to build a democratized working future where individuals are not limited by location and micromanagement.
4) Financial Development
Ethereum removes the need for intermediaries. It therefore decreases transactional fees and increases the efficiency of transactions. This is of great value to developing economies that are subject to complex means of remittance, pricey online payment fees, and high currency exchanges.
One FinTech company, Everex, is using Ethereum to help people in developing nations with simple cross-border transactions. It’s also helping provide people around the world more global investment opportunities. (Source: Ibid.)
In addition to these niche businesses, other top businesses that accept Ethereum include Microsoft Corporation (NASDAQ:MSFT), Intel Corporation (NASDAQ:INTC), Cisco Systems, Inc. (NASDAQ:CSCO), Samsung SDS Co Ltd (KRX:018260), Maersk, Toyota Motor Corp (NYSE:TM), Credit Suisse, Scotiabank (NYSE:BN). (Source: “10 companies and businesses that accept Ethereum,” Insider Monkey, September 29, 2017.)
While the value of Ethereum for businesses is clearly being recognized, there is a lot to be said for the value of Ethereum for individual users too.
Ethereum Value for Users
Platforms like Branche, Iconomi, and Augur are offering Ethereum-based blockchain solutions to basic financial services like microcredit and check cashing, providing individual investors with financial instruments that return high profits and act as a prediction tool/service for real-world events respectively.
In real estate transactions, Smart Contracts can reduce the friction involved with payments, liens, and mortgage contracts, and also alleviate privacy concerns among lenders and borrowers. Ethereum-based platforms can also facilitate listing and searching of properties.
“TrustStamp,” an Ethereum-based authentication system, uses social media and other publicly available data to verify your identity and provide a unique FICO-like trust score.
The blockchain’s ability to fix irregularities with copyright issues, tracking, payments, is going to bring a huge shift in the entertainment industry. Thanks to Smart Contract technology, artists can have absolute creative control over their work.
In the world of gaming too, “Beyond the Void,” “FirstBlood,” “Etherplay,” and “VDice” are all using Ethereum Smart Contracts to stay in the game.
“Akasha,” an Ethereum-based social media network, not only allows users to publish, share, and vote for work on the platform but also gives users other incentives to create rich content.
Given all that is already happening in the world of Ethereum and with the aggressive marketing strategy of the Enterprise Ethereum Alliance (EEA), Ethereum’s future potential is on an upward curve. This bodes well for ETH’s potential value as well as for the Ethereum market cap, which is currently in second place behind Bitcoin in the cryptocurrency market rankings.
My reading is that all the pieces of the Ethereum puzzle are falling into place exactly as Vitalik Buterin (the creator of Ethereum) intended. If things continue in the same vein, the next 12 months could see Ethereum breaking the $1,000 barrier.