Home Money What’s the Deal With Ethereum?

What’s the Deal With Ethereum?

by Alex McGee

If you’ve been paying attention to the epic rise of the cryptocurrency market, chances are you’ve at least heard of Ethereum. It’s the second largest cryptocurrency to date behind Bitcoin. But Ethereum and Bitcoin have important differences you should know about.

Bitcoin, at its simplest, is meant to be money. It’s a peer-to-peer electronic cash system. By using its network of people contributing (those people are called “miners”), it securely tracks and logs financial transactions and ownership of the bitcoins. Since this effort is spread around across the entire network, there is no need for a central bank or central point of control.

Ethereum uses that same type of technology – using a decentralized network of people – to do something completely different. While its currency is still traded by investors, Ethereum’s network is focused on running code for computer applications. Think of it as a group of computers from all over the world working together to run an app. This means investors in Ethereum are making a bet on this network and the applications they produce.

So why are investors willing to make this bet? Admittedly, some of it may be because of its standing as the second largest cryptocurrency in a hot market. However, educated investors in Ethereum are doing it for the benefits of having applications run by a decentralized network. These benefits are security and privacy for users, as well as the ability to develop other networks.

Which app, for example, would you prefer to install on your phone? One stores all your data in one place, is vulnerable to being hacked and is owned by a company that may sell your data to the highest bidder. The other app breaks up and encrypts your data and stores it across an entire network of computers. The latter is a decentralized app built on Ethereum’s network.

That said, Ethereum is not yet foolproof. As Wired Magazine reported, “Ethereum is Coding’s New Wild West.” Since these decentralized apps don’t have a central authority to trust, users of and investors in these apps must do their own due diligence. A single coding error in an app can allow hackers in. One popular app called Parity Wallet on the Ethereum network allowed hackers to steal $30 million from its users. All from a single missing word in its code.

In all, Ethereum holds promise. But, like any other investment or application, it’s not without its risks. You can learn more about Ethereum at www.ethereum.org.

You may also like