Ethereum Frontier launched into the internet on July 30, prompting coverage from publications ranging from Bitcoin Magazine to the front page of the International Business Times.
People who talk about Ethereum tend to speak as if the far-reaching implications the technology may bring are a fait accompli. They also tend to understand life beyond computers to a far greater degree than the bitcoin advocates.
The potential benefits seem to be many, depending on whom you ask: it can lend transparency to financial transactions, it can lower the barrier to entry for innovators, it can cut out middlemen, it can’t be controlled by any one entity, and it can do it all in a way that does not bear resemblance to previous models.
“The Ethereum blockchain is an infrastructure for a decentralized web. It’s a global computer that is keeping track of what is moving around on the network,” explained Ashley Taylor, who does social innovation for the Williamsburg-based company Consensys. Consensys is a company which aims to build businesses exclusively for the Ethereum platform. It was founded by a cofounder of Ethereum, Joseph Lubin.
How it works
What Ethereum does is take the blockchain infrastructure that makes bitcoin so appealing to so many people, and opens it up to be used as a platform for programs. Like the bitcoin blockchains, the Ethereum blockchains will have unique key codes for each individual transaction that cannot be edited or reversed and are visible to the public. Since the blockchain is not held on any one server or owned by any one corporation or government, it becomes impossible to edit surreptitiously.
“It’s impossible to cook the books with the Ethereum blockchain, to put it simply,” explained Greenpoint-based startup founder Dawud Gordon. “Since it’s a fully distributed network, you’d have to destroy like every server in the world.”
The industry most interested in the Ethereum blockchain appears to be finance, which is interested in the application of the blockchain as a public ledger.
“What you can do with an immutable public ledger is pretty boundless in the financial sector,” an analyst at a private equity and venture capital financial tech firm explained, on the condition of anonymity (his company is investing in blockchain infrastructures).
“With that much power behind it, you could have contracts that execute themselves, smart contracts they’re called,” he continued:
The main sort of power you get with that is that the current structures are so time intensive and require so much internal reconciliation: making sure that Person A’s books are in line with Person B’s books. With [the blockchain] you have this gigantic ledger that’s public. It’s like taking this need for departments of people that have their own accounting functions and you can just put that into a shared system that does it irrevocably and perfectly. And it does it really fast. Way faster than humans.
Gordon, who founded TwoSense, explained how a smart contract program on the blockchain could make something like Uber more democratic.
For instance, someone could build a program that allows people to ask for rides and matches them with people that are offering rides. This program would run automatically on the blockchain with no middleman, like Uber, taking a cut of the driver’s profits.
Further, he explained, if there was a surge-pricing component to the program, each person who dug into the blockchain would be able to see exactly what the rules were, and would not have to take it on faith that the surge pricing was fairly in line with the supply and demand of cars (which if you’ve ever seen 2.4x surge pricing and six cars circling a block, you’ve probably wondered yourself.) Not completely replacing a middleman, the coder of the program would be able to take a cut of each transaction executed on the blockchain, but with such lower barriers to entry, those cuts would probably be competed down to very small amounts.
Such businesses and applications are what Consensys aims to build.
The ether is starting to permeate everything. https://t.co/aUlRhxPVlt
— Joseph Lubin (@ethereumJoseph) August 1, 2015
The version of Ethereum which launched last week is a limited one which gives programmers access to the platform, in order to begin creating applications. A full, user-oriented version of the platform is not expected for another six to 12 months.
“Because this is opening up a new paradigm, there will just be an infinite number of ideas that people can experiment with,” Taylor, of Consensys, said. “The barriers to entry are a lot lower. With Ethereum out it makes it easy for an average, everyday programmer to build, and — boom — maybe that becomes something big.”