What is the Next Big Cryptocurrency?
In 2017, the price of a Bitcoin exploded from $1,000 in late January to more than $10,000 in early December. It earned the top cryptocurrency with a market capitalization of more than $167 billion.
Bitcoin is an invisible digital currency. It can be sent from one internet user to another. It runs on blockchain technology. Blockchain works by recording financial transactions on a digital ledger that's encrypted on a peer-to-peer network. The blockchain runs on thousands of computers worldwide.
The blockchain is as a world-changing technology. It will permanently disrupt the highly centralized financial system. Investors are eager to get in on the ground floor of this potentially revolutionary technology, are throwing money not only at Bitcoin, but at the more than 1,000 crypto-competitors known collectively as "altcoins".
Bitcoin was released in 2009. Satoshi Nakamoto invented Bitcoin. Critics initially dismissed Bitcoin as a futurist pipe dream, but now Bitcoin's underlying technology is being hailed as the future of finance.
Andrew Miller is an assistant professor of electrical and computer engineering. He thinks the bubble talk is irrelevant. What's more important is that investor speculation is fostering rapid innovation, creating hundreds of "really exciting experiments" in the form of new cryptocurrencies.
"Anyone investing in technology understands that there will be many failures," says Miller. "It seems to be the case with cryptocurrencies that the speculation is funding what is hopefully a really important infrastructure development."
Introducing Ethereum
Infrastructure? I thought we were talking about cryptocurrencies. Well, you can't have cryptocurrencies without the blockchain, and the impact of the distributed blockchain infrastructure will likely be far bigger than any individual cryptocurrency. That's why so many blockchain enthusiasts are going bonkers for a Bitcoin alternative called Ethereum.
Ethereum isn't just a cryptocurrency. It's a platform for building applications that run on the blockchain. Ethereum has its own programming language. Ethereum is made to enable more secure transactions on the blockchain. Ethereum has its own cryptocurrency called ether, but it's only useful within the Ethereum platform.
The Future of Money
The reason is that Ethereum's programming language and platform make it easy for startups and developers to create decentralized apps that empower individuals and businesses in new ways. One of the biggest, says Goyal, is the idea of "smart contracts." Instead of paying lawyers to write and enforce a contract, the deal can be programmed on the blockchain.
Ethereum also makes it easier to use what Miller at the University of Illinois calls "programmable money." He uses the example of a college student's bank account that's programmed with certain parental controls. The student can withdraw up to $100 a week for expenses, but anything beyond that requires an authorization by the parents' unique cryptography key. Miller thinks that programmable money is one of those ideas that will quickly spread into mainstream banking.
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