Ethereum

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Ethereum is a decentralized platform that runs smart contracts on a custom built blockchain. It was developed by the Ethereum Foundation, a Swiss nonprofit, with many outside contributions.[1] The Ethereum Wallet allows someone to hold and secure ether and other crypto-assets built on Ethereum, as well as write, deploy and use smart contracts. Ethereum's ether coin is the world's second most valuable cryptocurrency, after Bitcoin.[2]

Ethereum's goal is to use a blockchain to replace internet third parties that store data, transfer mortgages and keep track of complex financial instruments.[3]

Ethereum (ETH) is both a digital asset (AKA cryptocurrency) similar to bitcoin, and a decentralized software application platform.[4] It is run by a decentralized peer-to-peer network of computers. Computers in this network run decentralized applications (also called Dapps), which allow them to contribute to the network's total processing power by mining Ethereum's cryptocurrency (called ether). These computer programs can be anything, but the network is optimized to carry out rules that mechanically execute when certain conditions are met, like a contract. It uses its own distributed ledger based on the architecture of bitcoin's blockchain to store, execute, and protect these contracts via computerized cryptography.[5][6]

Background

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The white paper for Ethereum was created by Vitalik Buterin, a Canadian programmer and co-founder of Bitcoin Magazine, in 2013.[7][8][9][10] After its release, additional developers signed on to the project including Gavin Wood. Together, they and other founders launched a crowdfunding campaign in July of 2014 in which investors purchased Ethereum tokens (ether) to serve as shares in Ethereum. They raised $18 million from this campaign.[11]

The platform launched Frontier, the network's first live release, a year later, in July of 2015.[12] It was described by Ethereum's creators as "first in a series of releases that punctuate the roadmap for the development of Ethereum."[13]

Support for Ethereum has been strong. Forbes called the Ethereum network "great for innovation."[14] Furthermore, an organization known as the Enterprise Ethereum Alliance, a collection of Fortune 500 companies, have pledged to help each other develop the Ethereum platform and further "smart contract" technology. This group includes the National Bank of Canada, Cisco, American Family Insurance, CME Group, Toyota Research Institute, Mastercard, and Microsoft.[15][16]

However, the SEC began in May of 2018 to look into whether Ether should fall under its authority as a security or under the authority of the CFTC as a commodity. Unlike bitcoin, which was determined to be a commodity because it held no pre-launch ICO, Ethereum's blockchain network was funded through a presale of Ether, which complicates the question of how to classify the coin.[17]

References

  1. Ethereum Project. Ethereum.org.
  2. World's Second Most Valuable Cryptocurrency Under Regulatory Scrutiny. The Wall Street Journal.
  3. What is Ethereum. Coindesk.
  4. Understanding Ethereum. The New York Times.
  5. What is Ethereum?. Investopedia.com.
  6. Bitcoin Vs Ethereum: Driven by Different Purposes. Investopedia.
  7. Who Created Ethereum?. Coindesk.
  8. Ethereum: The Ultimate Smart Contract and Decentralized Application Platform. Web Archive.
  9. A Next-Generation Smart Contract and Decentralized Application Platform. Github.
  10. Ethereum whitepaper from Dec 2013. Twitter.
  11. Who Created Ethereum?. Coindesk.
  12. Welcome to Frontier!. Ethereum Foundation via Gitbooks.
  13. Ethereum Frontier release: Introduction. Etherem Foundation via Gitbooks.
  14. How Is Ethereum Different From Bitcoin?. Forbes.
  15. EEA Members. Enterprise Ethereum Alliance.
  16. How Is Ethereum Different From Bitcoin?. Forbes.
  17. SEC decision on Ethereum cryptocurrency could affect others funded by ICOs. Computerworld.