Ethereum: A valuable Internet financial sandbox

Rage Review : Daniel Cawrey is a former special editor of CoinDesk and now the COO of micropayment platform ZapChain. He is also involved in developing application projects on the Ethereum platform. This article is his analysis and comparison of the existing financial system and future development trends. He believes that there are many new technologies in the financial field, and the quality is uneven. The advantages of Ethereum make it the best option among all technologies. The author predicts that after more than a decade of development, Ethereum will move from technical exploration to the real world.

Translation: Annie_Xu

Daniel Cawrey, former CoinDesk contributing editor and COO of micropayment platform ZapChain, is working on his own Ethereum project.

In the article, Cawrey discussed why Ethereum was chosen among all platforms as a valuable tool for Internet financial companies to develop blockchain products.

Daniel Cawrey

With regard to Bitcoin and blockchain technology, the existing industry has made a technology choice - apparently they want blockchain, not Bitcoin.

Given the difficulties of Bitcoin's development, this choice is arguably reasonable; people's attention has subsequently fallen on new platforms that offer different features and advantages.

While Bitcoin’s ledger technology is a natural fit for innovations beyond current systems, there is a clear need to isolate blockchain technology and experiment with it in existing settings.

Ethereum has been working on this and has already completed production-ready code.

Simply put, Ethereum is a sandbox that allows all entrepreneurs and developers to experiment with any new product without causing any harm to the existing system.

Financial Industry Experiment

It’s an exciting time for internet finance; eager audiences await fresh ideas from banks; and a new generation – the millennials – is beginning to prepare to make critical financial decisions and locate new innovative banking services.

Alternatives to traditional savings or investment accounts are emerging; one example is the growth of peer-to-peer lending, where investors pool small amounts of money to lend to individuals who need funds. Investors receive returns, while individuals receive the funds they need; it is a win-win situation without the many limitations of the traditional banking system.

In addition, more creative financial services are about to emerge. With blockchain-based smart contract systems on platforms such as Ethereum, 21st century financial products will proliferate, and savvy users will also need this "millennial financial product portfolio."

Of course, blockchain technology does not modify the existing system, but builds a completely new structure; it is a reflection of the currency and protocols of the existing currency-dominated system.

Failed altcoin experiments

There are an astounding number of cryptocurrencies and altcoins out there, many of which disappear midway through, and we still don’t know if the ones that remain actually have any merit.

Some of these coins boast eye-popping market caps. NEM, for example, claims a market cap of $13 million, but it’s unclear whether this number is legitimate or not, as many altcoins are used in “pump and dump” scams.

However, once it was identified as an altcoin-based experiment within the digital currency ecosystem, they were left far behind, and I believe the era of cryptocurrency alternatives will come and go quickly.

However, from the perspective of altcoin technology, Ethereum clearly stands out. It has the potential for experimentation beyond its competitors - combining a ledger-based currency (Ether) with a complex protocol that can produce digital assets. These advanced features make innovations possible that were previously impossible.

As a standard open framework, Ethereum allows engineers to easily collaborate on the platform. Many technical projects can now be built on the Ethereum platform, and its current development stage is unmatched by other altcoins - being used by developers.

Rethinking the concept of money

Cryptocurrency proponents claim that altcoins create a “closed-loop economy” independent of the banking system, but this is a misguided understanding.

The banking industry is a global glue that provides important economic leverage, including market liquidity and commercial paper markets. Without its glue, a market recession is inevitable, as was the case in the Great Recession of 2007-2008.

Cryptocurrency supporters realize that the existing financial system has begun to lag behind other competitors in terms of development strength.

There are still a lot of technological systems that run backward cash-based economies, where cash, the basis of the economy, has nothing to back it up. The reason these systems are like this is because there is no technology that supports people's rethinking of the concept of money.

This is similar to computer emulators - the equipment needed for video games on older platforms. In finance, the concept of a system-backed currency now seems very old fashioned; perhaps like running a game of Donkey Kong on a laptop.

But now the technology of encryption system allows people to start to reflect, and those digital currencies are attracting more and more people's interest.

So what if, instead of emulating a currency-based system in the digital world, we tried something completely different?

Many Ethereum-based projects are making these attempts, and you can find many conceptual projects - some are financial, some are purely academic, and some are ambitious and pursue complete subversion. All these projects are carried out together, and it depends on who can persist to the end.

New ideas, lower costs

I predict that ideas based on Ethereum will outperform existing systems; in the next few years, the Ethereum ecosystem will mature and many projects will no longer be just good ideas, but will develop from proof of concept to the real world.

Ethereum helps build new models for various existing systems, and there will definitely be a turning point in the next decade, because blockchain-based systems will greatly reduce the cost of deploying new financial concepts.

This development process is similar to the evolution of the Internet in the past 20 years; low barriers to entry combined with low costs bring great opportunities for new digital systems. Ethereum combines the functions of accounts, blockchains and smart contracts, and has the potential to achieve cross-industry innovation.

This will enable exciting innovations in the financial industry, a revolution comparable to the Medici bookkeeping of centuries ago.

Ultimately, an economic paradigm based on digital assets will be realized, and Ethereum, as a test platform, is also helping to achieve this goal.