Ethereum is more than the second fiddle to Bitcoin. While it’s not a heavy hitter when it comes to valuation – and it is unlikely ever to be – this popular cryptocurrency brings much more to the table than Bitcoin ever could. In fact, where Bitcoin is a one-trick pony, Ethereum was designed from day one to be the backbone of dozens, if not hundreds, of different applications. Here are three of these amazing Ethereum-based crypto projects, what they do, and why they’re important.
Why Ethereum is Different
Before any serious discussion of projects based on Ethereum, though – and while it’s easy enough to find a simple guide on Ethereum (ETH) – we need to understand what it is about this blockchain that makes it different. While it’s created with the same basic technology as Bitcoin, Ethereum distinguishes itself in the following ways.
At its simplest, a “smart contract” is simply a piece of cryptographic code that contains the rules for a transaction on a blockchain. This isn’t new, as that’s exactly what facilitates transactions on the Bitcoin network, but Ethereum is designed to facilitate smart contracts undertake all sorts of different code transactions.
The versatility that Ethereum offers by letting users design smart contracts for specific actions, and the ability to have these smart contracts work in tandem with others, means that developers can literally program software programs that run on the blockchain. These decentralized apps, or DApps, can be designed for more or less any use from resource planning, asset management, or even game design.
The ERC-20 Standard
DApps built on Ethereum support the interaction of Ether – the token that lives on the blockchain. However, these DApps can also be used to create tokens based upon a universal Ethereum standard. Referred to ERC-20, this token standard serves as a template for Ethereum-based tokens in order to be compatible with the blockchain. ERC-20 tokens can then be used within a DApp’s ecosystem in a number of ways, including being sold in an initial coin offering in order to generate funding for a product.
After understanding how universal the Ethereum blockchain is and how versatile it can be, it’s easy to imagine how many different applications it could have. There are an untold number of Ethereum-based DApps in development at any given time, all of which make use of the ability to create ERC-20 tokens and to be governed by specific sets of smart contracts. Here are three of the most revolutionary projects running on Ethereum right now, both active and inactive.
Envisioned as a platform built to provide access to high-level computing functions, Golem aims to create a world-spanning virtual supercomputer that can be accessed or rented anywhere, by anyone, at any time. Users that need serious computing power, such as researchers running biological analysis experiments, artists compiling computer graphics for feature-length animated films, or running algorithms for machine learning and AI.
The key to Golem is that users across the world can either rent or contribute computing power from the network, with these transactions handled through the Golem Network Token, the project’s Ethereum-based cryptocurrency. This democratizes access to supercomputing in ways that were never thought to have been possible – but because of Ethereum’s unique architecture, this has become a reality.
Gnosis – which is ancient Greek for “knowledge” – is an Ethereum-based project that seeks to decentralize the processing of prediction markets in an automatic, transparent, and real-time manner. Gnosis can be used to make predictions on literally everything – from who’s going to win the next presidential election, the next World Series, or the next free Big Mac at the McDonalds in Times Square.
Yes, it’s essentially a betting app, but that diminishes the impact of Gnosis. It’s a completely transparent betting app that can automatically distribute winnings and is impossible to be interfered with and is incredibly resistant to tampering. As a result, this Ethereum-built DApp is poised to revolutionize gaming and gambling.
Long considered to have been the poster boy for Ethereum-based DApps, The Decentralized Autonomous Organization, also simply known as The DAO, shows both the heights of what Ethereum-based projects can accomplish and how those same projects can go horribly wrong. The DAO was a venture capital fund that was both completely investor-directed and completely automated. This set of smart contracts written on the Ethereum blockchain let investors purchase DAO tokens in exchange for Ether. This Ether was then invested, according to the predetermined rules of The DAO’s code.
Unfortunately, The DAO isn’t just one of the most groundbreaking attempts to harness Ethereum’s flexibility – it’s also one of the most important cautionary tales when it comes to cryptocurrency. Because of unintentional flaws in the smart contracts comprising The DAO, there was an exploitable loophole. Anonymous hackers discovered and exploited this loophole, stealing around $50 million worth of Ether that had been invested in the fund.
The three Ethereum-backed crypto projects detailed above are, truly, just the tip of the iceberg when it comes to examples of what flexible and adaptable blockchains can accomplish. While not every project out there will be as innovative as Golem, as able to be monetized as Gnosis, or as ripe with unfulfilled promise as The DAO, it remains obvious that Ethereum has the utility that other blockchains lack.
Bitcoin, with its constantly soaring and fluctuating valuation, is unlikely to go away any time soon. At the same token, neither is Ethereum, though it’s wildly unlikely the two will ever be close in value. In fact, Ethereum’s versatility lends it stability that Bitcoin will always lack. As a result, the Ethereum blockchain possibly has the staying power to outlast its older brother in the longer term.
Author: Catherine Tims is a freelance writer for Bitcoin Exchange Guide . After receiving her Master’s degree in English Language and Linguistics at the University of Arizona, she taught writing to graduate students at the University of Illinois/Champaign-Urbana. She has her own writing business, Ivy League Content, and freelances full time for business clients who need highly-researched articles.