Entrepreneurs in need of funding for high-tech startups traditionally have gone hat in hand to venture capitalists in Silicon Valley. A new investment frontier threatens to make those days a thing of the past.
…many enthusiasts believe Ethereum’s market value will eventually surpass that of Bitcoin.
This new frontier is a virtual environment built on blockchain technology and enables startups to obtain sufficient funding in a matter of seconds, minutes, or days from investors across the globe. The ease of fundraising promises a boom in high-tech ventures and an almost limitless array of new apps.
Ethereum, a blockchain platform upon which tech business startups are built, is a bold trailblazer in this new investment economy. Ether is the name for Ethereum’s digital currency.
The Ethereum Foundation was created in 2014 by Vitalik Buterin, co-founder of Bitcoin Magazine. Vitalik leads the Ethereum research team. The Ethereum Foundation states its mission is “to promote and support research, development, and education to bring decentralized protocols and tools to the world that empower developers to produce next generation decentralized applications (dapps), and together build a more globally accessible, freer and more trustworthy internet.”
Ethereum Changes Venture Capital Landscape
Tech startups use Ethereum’s open source blockchain platform to create dapps for services. To fund the startups, the techies crowdsource. Often these businesses are still in the idea phase when seeking investment. The intent is to develop a dapp that will be used within the global infrastructure, to do many things virtually, such as conduct business transactions, begin and end contracts, exchange funds, create cryptocurrency, store information, and fund new ventures. Ether is the cryptocurrency used in paying for the use of the platform and the services built on it. Use of the platform eliminates the need for a third party (such as a bank or PayPal) to handle the transactions.
Ethereum’s own startup was bootstrapped by a global crowd sale of 60 million ethers valued at $0.30 per ether. Investors used Bitcoins to purchase the ethers. Ethers have a market value at the time of this writing of $241 each, placing Ethereum in the number two spot for global digital currency value. To provide perspective on relative value, Bitcoin, in the number one spot, is selling at around ten times the price of an ether.
In the hope of reducing price volatility, most cryptocurrency creators would rather see their tokens become fiat currency rather than a commodity. One has to question whether these dreams are becoming a reality when Bitcoin rose from $369 on July 6, 2016, to $2,629 on July 5, 2017. Along those lines, Ethereum’s recent hiccup (briefly freefalling from $319 to 10 cents in seconds on one exchange after a Ge‘multimillion dollar’ trade on June 21, 2017) might cause investors to pause. Since the crash, the value has rebounded to around to its current value of $241.
Because Ethereum is a decentralized platform for applications rather than a digital currency and payment network (like Bitcoin), many enthusiasts believe Ethereum’s market value will eventually surpass that of Bitcoin. Some anticipated uses for the Ethereum platform include safe data storage, including the storage of vast amounts of health records. The system would enable multiple caregivers to access the same set of a patient’s information. Additionally, distribution of data across a blockchain should make it more difficult for hackers to access personal information. Waymo, Google’s self-driving cars, will use Ethereum as the platform for communicating between vehicles.
With Ethereum, startups don’t need Silicon Valley. In a virtual world, you really can make money out of thin air.