Which crypto currency improves the Ethereum model

Ethereum is constantly evolving

If you are new, have a look here. A special surprise is waiting!

At the beginning of 2018, ether was the cryptocurrency with the second highest capitalization. Only bitcoin is bigger. But Ethereum is much more than a currency and the potential of the network is enormous. Not only speculators, but also companies are increasingly discovering the possibilities.

A brief analysis of bitcoin - currency, investment or speculation? What is the best way to speculate with the cryptocurrency? - my FREE WHITEPAPER offers more information on the subject! Enter your email address here

Like any blockchain, the Ethereum blockchain is a decentralized network of databases. The currency on which Ethereum is based is called Ether. In common parlance, however, no distinction is made, and Ethereum is often used synonymously for ether. In addition to the currency ether, the main elements of Ethereum are smart contracts, decentralized applications, and decentralized autonomous organizations. All of this is made possible by the Ethereum Virtual Machine. I have already described what all of this is in another blog post, so I will not explain it again here and refer to the explanations that can be found there.

How has Ethereum developed?

In 2013, the then 19-year-old Canadian Vitalik Buterin, a programmer with Russian roots, published a white paper on Ethereum. He was involved in the development of Bitcoin as a teenager and was disappointed that Bitcoin should be nothing more than a substitute for money. Dr. Gavin Wood published the Yellow Paper on the Etherium Virtual Machine in April 2014.

In 2014, the Swiss company Ethereum Switzerland GmbH developed the corresponding software. The sale of Ether as part of a crowdfunding campaign began in late summer 2014 and raised the equivalent of more than 18 million US dollars from investors within 42 days. There was an issue of 60 million ethers. Part of the funds went to the founders, another part to the non-profit Ethereum Foundation.

The beta version, called Ethereum Frontier, went online on July 30, 2015. Kraken will be the first exchange to start trading Ether in August 2015. When the network went into the next phase with Homestead in March 2016, the use of Ethereum was considered safe. Ethereum's market capitalization will reach a billion dollars this month.

In May 2016, “The DAO”, an automated venture capital fund managed via smart contracts, raised over 160 million dollars and is also the largest decentralized autonomous organization. In June 2016, hackers exploited a vulnerability in the code of “The DAO” and stole 3.6 million ethers, which at the time was the equivalent of 65 million euros. Part of the community reversed this theft by “manipulating” the blockchain over the majority of network participants. This resulted in a so-called “hard fork”, as part of the community rejected this intervention for philosophical reasons. This resulted in “Ethereum Classic” with its own coin called “Ether Classic” under the abbreviation “ETC” and its own blockchain. The normal “Ethereum” (with the corrected blockchain) has today's main variant of Ethereum with “Ether” under the abbreviation “ETH”. In the following, my further remarks refer only to ETH, which has also established itself as the “normal” Ethereum. The Ethereum Foundation is only dedicated to the new version of the blockchain and does not pay any attention to Ethereum Classic.

The third major update called “Metropolis” was activated on October 17th, 2017 with the first sub-phase called “Byzantine”. This significantly improved the user friendliness and at the same time reduced the reward for mining from 5 ethers to 3 ethers in order to initiate the switch from Proof of Work to Proof of Stake. The next sub-phase called “Constantinople” is to be activated in 2018. The fourth and final phase is called “Serenity” and is expected for 2018. The final switch from Proof of Work to Proof of Stake should then take place. More about that in a moment.

How has the market capitalization developed recently?

Ethereum with the currency unit ether (ETH) has prevailed. This can also be seen in the current market capitalization, i.e. the sum in terms of value of all existing currency units. I then compare the market capitalization of ETC with that of ETH and that in turn with the market capitalization of Bitcoin. After Bitcoin, ETH today has by far the second highest market capitalization of all cryptocurrencies.

Market capitalization “Ether Classic” ETC:

Source: https://bitinfocharts.com/de/comparison/ethereum%20classic-marketcap.html, access: 09.03.2018


Market capitalization “Ether” ETH:

Source: https://bitinfocharts.com/de/comparison/ethereum-marketcap.html, access: 09.03.2018


Market capitalization "Bitcoin":

Source: https://bitinfocharts.com/de/comparison/bitcoin-marketcap.html, access: 09.03.2018


While Bitcoin was conceived as a first-generation cryptocurrency as a simple payment system and currency, Ethereum represents a second-generation cryptocurrency with the option of dynamic contracts in the form of smart contracts. Although Ethereum is much younger than Bitcoin, its high volume speaks so far a clear language. The much larger range of functions of Ethereum opens up completely different application possibilities. While Bitcoin was launched in 2009, the Genesis Block (i.e. the first block in the blockchain) at Ethereum was created on July 30, 2015. Since then, development has progressed rapidly and will change with the switch from Proof of Work to Proof of Change stake qualitatively very significantly.

Bitcoin briefly analyzed - currency, investment or speculation? What is the best way to speculate with the cryptocurrency? - my FREE WHITEPAPER offers more information on the subject! Enter your email address here

Proof of Stake as an alternative to Proof of Work

Transactions in most blockchains, including the Bitcoin and Ethereum blockchains, are currently being validated by miners and further blocks are being formed. These blocks will then be added to the blockchain. This is done through computationally intensive solving of cryptographic puzzles, for which miners are then rewarded with newly created (“mined”) currency units. This mechanism serves the security and integrity of the blockchain.

Ethereum is now planning to switch from Proof of Work to Proof of Stake. In Proof of Stake-based blockchains, transactions are validated and new blocks are formed using a new consensus mechanism. Instead of the competition-oriented, computationally intensive solving of tasks by a network node, this relies on a completely new method. A group of validators, randomly selected by the system, takes over the vote on new blocks of the blockchain. Your voting weight is based on the volume of each individual deposited “ether”. Every participant in the Ethereum network can become a validator by blocking Ether in a special depot using a special transaction. The process of creating and voting on new blocks then takes place through a consensus mechanism of all participating validators. The validators are rewarded depending on the volume of ether they have stored.

Significant advantages of a Proof of Stake procedure, for which there are several different approaches, are increased security, the reduction of the risk of centralization of the decision through ever larger mining pools and the more efficient and resource-saving work on the blockchain.

Proof of Stake basically introduces “interest” and a “census option”

Since the reward in the form of ether is not for the use of computing power, but for the provision of “doped capital”, a “return” is introduced. This is fundamentally changing the business model of miners. If not enough ether were given out as a reward to justify the miners' efforts, less and less would be mined and thus the development of the blockchain would be hindered. In the future, however, it will no longer be necessary to compensate for expensive energy consumption through sufficient delivery of ether in order not to bring the development of the blockchain to a standstill. The amount of the “interest” is thus formed on the market. This should ultimately compete with the interest rate level of other cryptocurrencies (which will work according to the proof of stake method) and also take place at the interest rate level of conventional currencies. The blockchain is thus competing with interest rates manipulated by central banks. But of course the relevant volume will probably remain negligible in comparison to conventional currencies for a long time. Nonetheless, this means - if you will - a general change in the way we view monetary policy.

A consensus mechanism based on “voting according to capital shares” is reminiscent of a (theoretically possible) design of the electoral law in democratic states depending on the tax payment. Anyone who pays more taxes in a system with “census voting rights” (in this case binds Ether voluntarily) would have more voting rights! The principle: “One Man One Vote” would be over. The anarchist idealists of cryptocurrencies who thought of a democratization of the monetary system on the occasion of the introduction of Bitcoin, will probably pull their hair out! But I think that we don't have to be afraid of that. In the case of stock corporations, too, shareholders make their decisions based on voting rights. In doing so, they appear to represent their interests better than if all those who do not belong are allowed to vote. You also have to note that a validation process in the blockchain is not about political votes, but about technical processes that serve the integrity of the blockchain. At least initially it is not about content, but about “truth of transactions”. But who knows what smart contracts, dApps and, above all, DAOs will one day bring? It is not surprising that libertarian contemporaries in particular have always developed sympathy for crypto currencies. If different smart contracts are connected to one another, DAOs are created that, for example, make investments, support political agendas, manage rights or allocate apartments.

Ethereum is currently the most exciting commercial development in the crypto sector

The Ethereum Network is much more than a cryptocurrency. With the possibility of smart contracts, it is a development environment for technologies and applications that is likely to bring about major changes in many branches of the economy over the next few years. And it has the potential to trigger social changes in the medium term that are currently difficult to assess. Just think of DAOs and ICOs. In any case, it will soon become clear who knows how to use the opportunities that will arise individually. And states will also have to consider how they can achieve competitive advantages for their economies. It is good news for the German-speaking area that the penetration of crypto currencies in relation to the population worldwide (!) Is currently nowhere as high as here. We have probably already overslept a lot in the area of ​​digitization, but here we can also preserve our chances on a global level. Because our liberal political systems also allow a lot that is often viewed elsewhere with an eagle eye!

A brief analysis of bitcoin - currency, investment or speculation? What is the best way to speculate with the cryptocurrency? - my FREE WHITEPAPER offers more information on the subject! Enter your email address here

Free whitepaper

How you can increase the value of your company despite 0% interest:

  • Free whitepaper
  • Quick overview
  • Detailed explanation

Enter your e-mail and you can immediately start with the whitepaper:

By clicking on the button, I agree to receive the information and, if necessary, further material (more information). My data is SSL-secured and I can revoke my consent at any time.

You might also be interested

Did you like this article? Then feel free to share it!