Ethereum has taken the altcoin spotlight following a boom in value of ether.
Ethereum is a blockchain platform created by University of Waterloo dropout Vitalik Buterin. A blockchain is effectively a public record of something. Whatever that something is depends on the network. Most commonly, blockchains are used for commercial purposes like online transaction records. To go along with his platform, Buterin created a cryptocurrency named ether. From March 1 to June 13, the value of ether went up nearly 2500% from $15.74 USD per coin to $392.42 USD. While promising, the value has since decreased substantially to $224.01 USD as of July 12.
Cryptocurrencies can be confusing at face value, as they have no physical form to determine their relative value. The coins are earned by having a computer complete random math equations. If successfully completed, there is a chance to be randomly selected to earn ether as a reward for volunteering computational power. The FAQ section of the Ethereum website explains exactly what ether does and how it is earned.
“[ether] is a form of payment made by the clients of the platform to the machines executing the requested operations. To put it another way, ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources).”
Cryptocurrencies have been around for roughly 20 years, but truly made their mark in 2009 with the boom in Bitcoin. A Bitcoin gold rush led to miners building supercomputers designed specifically to find these coins. To compete, several alternative coins, dubbed altcoins, hit the market.
While they do not have physical form, various groups have been cashing in on the fad. While miners have reported they have made anywhere from a couple thousand dollars on reddit to enough to retire in VICE Money interviews, there is an industry boom happening as well. Hydro One is winning based on the sheer amount of electricity required to run these computers at all hours of the day. In addition, Ethereum relies on Graphic Processing Units (GPUs) to mine. Their prices have skyrocketed due to a rise in demand from prospective miners. A quick search on Craigslist and Kijiji can find mining rigs selling for several thousand dollars, hoping to make a quick buck off of ready-made computers.
While ether has been making headlines with its rapid rise and fall in worth, it was not designed to be a major currency or the death of Bitcoin. Reddit user u/heliumcraft wrote “the primary purpose of ether is to pay for ‘gas’ to run smart contracts on the platform. It can be used as a currency, and a very good one at that.” They go on to write that while ether has taken off, Ethereum’s true potential might lie in supporting the creation of Stablecoins such as Maker.
For those interested in dipping their toes into mining cryptocurrency, there is a wealth of information online on various forums. Simply google “start mining Ethereum” and grab a metaphorical gold panning kit.