A co-founder of Ethereum — the second most-traded cryptocurrency behind bitcoin — told a crowd at South By Southwest on Friday that the technology behind the virtual coins has the potential to drive growth in industries ranging from shipping and health care to entertainment by cutting out value-draining middlemen.
“The beauty of this is that it shrinks the role, the dominance and the monetization, of the intermediary,” said Joseph Lubin, a Canadian entrepreneur who also started ConsenSys, a company that builds applications for Ethereum.
At its core, Ethereum is an open-source software platform that harnesses far-flung computers to perform complex tasks, such as financial transactions, and record the results. The system is based on so-called “blockchain” technology, in which every transaction or computation on the decentralized network is replicated automatically and shared across it — resulting in what’s known as a distributed ledger that’s verifiable to everyone and permanent.
Individual tokens on the Ethereum platform are called ether, and they’re used to pay for computing power on it. Similar to bitcoin, however, some people also buy and sell ether as speculative investments.
Lubin said Ethereum, created in 2014, has the potential to be deployed across many different sectors because its technology is programmable. Both ether and bitcoin are based on blockchains, but bitcoin has a more singular focus as a decentralized digital currency.
Ethereum “is a general platform for decentralized applications,” Lubin said.
It allows for “smart contracts” for instance, in which instructions for complex transactions can be encoded and automatically executed when conditions are met. Pointing to the music industry as an example, Lubin said song writers and others potentially would be able to upload their work, along with licensing and pricing information, and then instantly receive executed contracts and payment if people want it.
“Someone could buy a license, receive it instantly and then the artist could get paid instantly,” he said. “We are going to be able to squeeze out delays and frictions” in many different industries.
A number of major companies are exploring real-world uses for the blockchain technology that drives Ethereum. An organization called the Enterprise Ethereum Alliance — which includes Microsoft, Intel and others — was formed last year to develop standards and potential applications for it.
Still, the price of ether tokens has been extremely volatile, amid what has been a speculative cryptocurrency investment frenzy overall.
A single ether token was trading recently at about $700, according to Coinmarketcap.com, which provides cryptocurrency price quotes. Ether climbed nearly 10,000 percent in 2017 after beginning last year at about $8 per token, and it hit an all-time high above $1,400 two months ago before slumping.
Bitcoin, created in 2009, was trading recently at about $9,100 per token. It has fallen significantly since notching a nearly 2,000 percent climb last year to hit an all-time high above $20,000 in December.
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