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Ethereum Investors Are Still Early To The Scene


I have partnered with eToro to offer a free webinar teaching new users the Tools For Investing In Ethereum. I will also be answering questions directly from viewers throughout the session. The webinar will run from 3PM – 4PM UTC on Wednesday November 29th. The webinar is free and you are able to register here.

The future is programmable money

There is no doubt that the future world economy will be built upon an infrastructure of smart contracts. These smart contracts will send and receive value based on specified and immutable rules that are guaranteed to execute with 100% uptime. Ethereum has the potential – and is best positioned today – to create this infrastructure. Existing fiat currencies like the US dollar cannot be directly programmed to move autonomously. Complex scripts and databases can achieve similar outcomes to Ethereum, but the costs, risks, lack of trust and permissioned nature of such a structure becomes enormously unappealing to every party involved. Dollars will – in the next 10 years – be rebuilt as cryptocurrency and such a cryptocurrency would be compatible with the public and permissionless smart contract infrastructure available on Ethereum.

This future is still a decade away. Ethereum is currently just over 2 years old and on the timescale of the internet (to which it is commonly compared) this cryptoasset is nascent. If the cryptoasset bubble can be compared to the internet, then it’s $200bn market cap pales in comparison to several trillion dollar market which made up the Dot Com bubble. Given that Ethereum and smart contracts have the potential to replace gold, realize new industries and disrupt global supply chains (this link is worth the 1hr 30m to watch), it’s possible that the value of this tech will extend well beyond anything we’ve seen before – Ethereum being one of the key players.

Ethereum is multi-purpose, made up of addresses that reference either a wallet or a smart contract. In the case of a wallet address, the funds received are stored to either be spent later or held. More powerfully however, is an address which specifies a smart contract. When Ether is received at a smart contract address, the contract carries out a set of transparent functions. These functions could exchange the received Ether for another token (typical in an ICO), sending the new token back to the original sender; they could hold the Ether in an escrow until other events occur; or they could send Ether onto another smart contract which carries out yet further functions. These are just a few examples that demonstrate the simple but fundamental value of Ethereum, and much more complex ideas are being developed every day. Despite Ethereum also being so young, there are already a number of real world examples of Ethereum smart contracts in play today, here are just a few:

Prism, which is currently in closed beta, allows for users to build a cryptoasset portfolio on the Ethereum blockchain. The user enters the cryptoassets they would like to buy, the percentage of each asset in the portfolio and how much to invest. A single Ethereum transaction is then sent to the the address and the portfolio is built (using liquidity from Prism). The portfolio can then be liquidated or rebalanced at any point in the future. There are no middlemen and no costs of operation. The tool is decentralized, can be accessed by anyone in the world and provides better security at a lower cost than any other platform.

Augur is an Ethereum based prediction market platform that rewards users for correctly predicting outcomes. Users can create markets from anywhere in the world and others can make predictions on the outcome of that market knowing that the contract will pay out automatically and correctly. From Augur’s point of view, there is no cost of managing client funds or providing an escrow service – all of the backend functionality is conducted on the Ethereum blockchain via smart contracts. Event outcomes are relayed by “Oracles”, services which digitize reality into a machine-readable format, and payouts are made based on the results.

Etherisc is a decentraized insurance product which generates payouts immediately and autonomously based on pre-agreed conditions. For simple true or false events, smart contract based insurance could disrupt the market in a matter of years. See this short pitch by Etherisc co-founder Stephan Karpischek. It is likely that in the not too distant future, smart contracts will replace much of the insurance sector as a means for insurance companies to lower costs, and consumers to receive faster and fairer payouts.

These are just a few of the earliest smart contract applications to be developed and the most complex and revolutionary are yet to be imagined. This doesn’t even scratch the surface of Ethereum’s role in machine-to-machine transactions and AI. More ambitious projects are also appearing, one such example being Bloom’s vision to decentralize credit scoring across borders. Whether these companies above are the Googles or the AOL’s of blockchain is unknown, and the reality is that the behemoths of this industry are likely still on the drawing board, waiting for a serendipitous moment that forms the basis of something globally pervasive.

It is highly unlikely that in 5 to 10 years the world economy will be happy doing business on layers upon layers of hackable and expensive database infrastructure. Fiat currencies that wish to take advantage of this likely-to-be trillion dollar protocol will require their own compatible crypto or risk facing obscurity as these digital assets take over (alternatively, Governments may stick to the old rules and attempt to force crypto out; this would simply delay the timeframes). Governments will also realize that far from tax avoidance, cryptocurrencies can make taxing citizens more effective and efficient; potentially allowing them to justify a Big Brother approach by passing on these savings to the tax payer in the form of lower taxes.

Crypto is the future of the socio-economic global landscape, and the price of Ethereum – if it continues its path as a dominant blockchain – will ride the wave of this boom to heights that are many times higher than today. In the nearer term however, Ethereum is expected to launch “Casper”, a network upgrade that will reward users for holding and staking Ether in specialized smart contracts that help to secure the network – removing millions of dollars from circulation and placing upward pressure on the price. Other developments to be launched in the next 2 years will also enable massive scaling of Ethereum transactions, making this technology unrivalled in its ability for not just executing smart contracts, but acting as a global payment processor.

Register to our eToro webinar on Wednesday 29th November to learn more. I’ll be available to answer questions or alternatively, send me a message on Twitter. Further details about buying Ethereum can be found on our how to buy Ethereum guide.

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Nick Founder