Last updated on October 13th, 2017 at 06:21 pm
The Ethereum project has raised over 11,000 Bitcoins — or $6.4 million at the time of writing — to help fund its ambitious project of building a decentralized platform for practically any kind of contract.
In exchange for one Bitcoin, funders of Ethereum get 2,000 ether (ETH), the proprietary cryptocurrency that fuels the Ethereum network. When the network launches this winter, ether will pay for cryptographic computations on the Ethereum blockchain in order to verify contracts.
The Ethereum Genesis Sale is set to last for another 30 days, with the amount of ether received for one Bitcoin decreasing over that time period. Once the actual network launches in a few months, all the ether that had been purchased during the Genesis Sale will be hardcoded into Ethereum’s very first block and distributed to backers in a downloadable client.
After that, an additional 9.9% of that initial ETH amount will be given to early contributors and team members; another 9.9% grant will go toward an Ethereum foundation; and finally, an amount equal to 26% of the initial ETH block will be distributed to miners each year.
Ethereum’s Long-Term Potential
The launch of Ethereum has been heavily hyped in the cryptocurrency community during 2014, and for good reason — this system attempts to do for contracts what Bitcoin did for currency. Having a decentralized, trustless network that can cryptographically verify contracts could potentially provide cheaper and more efficient versions of lawyers and brokers. Though, it’s “contracts” allow for much, much more than that.
Of course, those types of applications are many years down the line and only represent a taste of the potential inherent in Ethereum. But project creator Vitalik Buterin explains on the Ethereum YouTube channel that once his network matures, it can cut out the middle men for virtually any type of contract or transaction:
- Decentralized finance and property management
- Peer-to-peer messaging and social networks
- Distributed data hosting and storage
- Online voting and transparent governance
These are just are few of the major possibilities, but the nature of Ethereum is that it’s completely open to any kind of contract. It doesn’t have built-in categories for what kinds of contracts are supported, as is the case with NXT or Counterparty.
Because of Ethereum’s agnosticism toward what the network gets used for, it’s actually very difficult to predict the kinds of applications that might get built. “The most exciting applications of Ethereum are probably the ones that we have not even thought of,” according to Vitalik.
A Decentralized Autonomous Future
Indeed, taking the idea of decentralized applications and extending it to the future yields some fascinating possibilities.
When the Genesis Sale began, the Ethereum project team took to the IAmA subreddit to answer supporters’ questions. One of them asked, “What is the most sci-fi crazy borderline unimaginable application that Ethereum could be used for in the future?”
Vitalik responded with a vision of a futuristic society that runs entirely on distributed contracts and decentralized agreements between parties. For example, he imagines a scenario where renting some land involves payments to the landlord through the blockchain — if the renter stops paying, the blockchain will automatically tell the land registry to switch ownership back to the landlord, and the locks will no longer work with that renter’s smartphone key. According to Vitalik, this kind of blockchain-based contract management isn’t just applied to the renter:
Of course, your landlord is bound by the same restrictions — if he shuts off his account paying the local government $6.60 land value tax per day, then he loses ownership and the contract automatically switches over so you are renting from the government instead. The government itself is simply a large decentralized organization, and you can see in real time the $6.60 moving on the blockchain and eventually getting into an account to pay for a medical research program trying to extend the human lifespan from 170 years to 230.
Ethereum could eventually serve as the basis for decentralized governance, allowing blockchain technology to make government both more efficient and more transparent. There’s no need to trust in a few flawed humans to mediate contracts fairly and accurately because the Ethereum network will do those things better and faster.
Pitfalls on the Road to Genesis
Despite all of Ethereum’s potential, it hasn’t been without its share of problems on the way to launch. Because the Genesis Sale effectively amounts to an IPO, it caused worries that federal securities regulators might interfere — as a result, the ether sale was delayed until the project was confident enough in its legal standing.
During his interview with Coin Brief, entrepreneur Erik Voorhees commented on the irony of Ethereum being open to regulation prior to launch:
That’s totally understandable that they would want to do that, but to me that’s sort of the opposite of how this cryptocurrency stuff should work. There shouldn’t be a point of failure with the founders. It shouldn’t be that if they release it, a regulator can stamp them out and then Ethereum is gone.
Such a dynamic seems to illustrate how even though a mature Ethereum network has vast potential for changing society many years down the line, the project is nonetheless still in its infancy at this point. Perhaps it was good that the team got their legal ducks in order before basically launching a multimillion-dollar IPO — it would be a shame for regulators to kill such a promising project before it even gets off the ground.
For now, Ethereum certainly deserves a close look by anyone who’s interested in applying the decentralized nature of Bitcoin to the complex world of contracts and laws. If the project can successfully launch the network this winter and subsequently nurture a dedicated community of developers, it just might turn Vitalik Buterin’s futuristic vision into a reality.