Investors are pouring a lot of money flow into bitcoin, but participants in the cryptocurrency market may be missing the real story: Ethereum is about to reinvent itself, and the impact could have far-reaching consequences throughout the enterprise world.
Released in 2015, Ethereum has grown to become the second-largest cryptocurrency by market capitalization. It differs from bitcoin in that it powers an increasingly popular smart contract system and facilitates the building of decentralized applications or DApps on the blockchain which appeals to developers. A recent report by Electric Capital found that Ethereum leads all cryptocurrencies in the number of active developers, with four times as many per month as bitcoin.
Despite predictions by a number of financial technology participants that it would overtake bitcoin, Ethereum has yet to live up to its promise. It has been plagued by issues of scalability, security and performance while its overall value has lagged far behind the premier cryptocurrency.
However, the Ethereum community has been working to introduce the first key phase of Ethereum 2.0 by early next year, a new version designed to reshape the protocol dramatically and resolve a number of its issues. An update on the current status of this highly anticipated rollout and an overview on the state of Ethereum was provided at the BuildETH gathering of developers, entrepreneurs and stakeholders in San Francisco on Friday.
It was less an attempt to sugarcoat the obvious and more about a realistic assessment of the hard work that lies ahead.
“Ethereum is still a very immature platform,” said Grant Hummer, co-founder of Chromatic Capital. “It’s pretty clear to me that we have a long way to go when it comes to mainstream user adoption. But I’m massively optimistic about Ethereum in the long term.”
Move to proof-of-stake
Ethereum 2.0 could go a long way toward resolving concerns about user adoption. The platform will move to the Casper Protocol, a highly complex method of digital transaction best explained here. The key differences are moving from proof-of-work, the bitcoin model, to proof-of-stake, which will improve efficiency and security. The other is the use of sharding, a form of database partitioning designed to speed processing and expand scalability.
Last month, Ethereum announced that the 2.0 integration of the proof-of-stake phase will launch on Jan. 3, 2020. The date was not arbitrarily selected: It’s a sly dig at the leading cryptocurrency as the date is also the 11th anniversary of the original bitcoin Genesis block.
A central question on attendees’ minds at BuildETH was whether the first-phase launch would stay on schedule. In a presentation on Friday, Alex Stokes of the Ethereum Foundation declined to address this directly. And in an exclusive interview with SiliconANGLE at the conference, Stokes was careful to say that Jan. 3 was the earliest possibility.
“That’s as a minimum,” Stokes said. “We wouldn’t have it before then. Even that date could change.”
Growing ties to enterprise projects
Ethereum’s fitful journey is running in parallel with another key development: Despite the platform’s issues, enterprises continue to get on board. Earlier this year, there was a report that Samsung Electronics Co. Ltd. was developing its own custom blockchain based on Ethereum, and in June the Polish bank Alior announced that it would use Ethereum to authenticate and secure clients’ sensitive documents.
Ethereum also sits at the center of major projects involving cross-industry blockchain collaboration. The Linux Foundation-hosted Hyperledger Project welcomed eight new large enterprises into its fold in June, including Microsoft Corp., Salesforce Inc., and the Ethereum Foundation.
Ethereum had been active in Hyperledger long before last month’s news. Hyperledger partnered earlier with the Enterprise Ethereum Alliance, chartered to develop open blockchain specifications for driving business interoperability. Alliance board members include JP Morgan, Santander Bank and Intel Corp.
“There was a need for something like Enterprise Ethereum Alliance that a company like JP Morgan could hang its hat on,” said Hyperledger Executive Director Brian Behlendorf.
Behlendorf’s organization has been actively engaged with Ethereum in other ways. Hyperledger Burrow, a modular blockchain client with a permissioned smart contract interpreter, was partly developed to the specifications of the Ethereum Virtual Machine.
“Mapping the world of Ethereum to the world of Fabric has been an interesting exercise,” Behlendorf said. “Enterprises are starting to realize there is this full spectrum.”
Focus on developers and DApps
Behind enterprise interest in the Ethereum blockchain is a developer community attracted to the open-source project development opportunities offered by Hyperledger and potential uses for decentralized applications. Ethereum developers remain the largest creators of decentralized finance or DeFi applications and DApps, based on research from Binance released last month.
The result is a steady stream of DApps making their way into use. OpenLaw automates legal contracts. Etherisc is a decentralized insurance protocol covering events like flight delays and hurricanes. And 0x allows developers to add exchange functionality for a number of use cases, such as book ordering or decentralized loans, by adding a few lines of code.
“Ethereum’s core developer community is quite strong,” Hummer told attendees on Friday. “They come so they can build cool stuff that they think will change the world.”
Much is riding on the release of Ethereum 2.0 as the cryptocurrency world moves uncertainly into 2020. It’s a tricky proposition to couple a new system onto an active public blockchain, yet it’s the kind of gamble that increasingly appears to be part of the fabric driving the cryptocurrency space. Hummer himself once described losing $1 million in a day and feeling “OK” about it all.
“In my opinion, investors are the least important part of the community,” Hummer said during BuildETH. “It depends on developers and users.”
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