Fake or real? Bitcoin companies seem to be straying from the original intention of the Ethereum platform

After the first production-ready version of ethereum, Homestead, was launched this month, bitcoin businesses are turning to how they can incorporate blockchain technology into their existing products and services.

So far, companies as diverse as bitcoin storage platform Uphold, bitcoin mining company BTCS and hardware device maker Ledger have been among the first to announce innovations using the ethereum platform. Coinbase plans to host an internal event on its own platform this week.

What remains unclear, however, is how these companies will use Ethereum, which became famous in 2014 for its support for smart contracts and decentralized applications (dapps), and whether they will operate in lockstep with the new generation of blockchain platforms.

Despite the wide range of uses mentioned above, interviews show that Bitcoin startups are supporting the Ethereum platform by providing services designed to increase liquidity of their trading token (Ether). Although they are excited about its huge potential, they are not sure when the opportunity will come or what it means for their business model.

For example, Jorge Pereira, executive vice president of Uphold, mentioned that his company will first seek to support Ethereum, but the company will also consider other emerging applications. He said that the changes he observed led to his change of opinion.

Pereira said:

Ethereum was a curious new thing before, and no one expected the huge impact it would have. Now, it has achieved many goals and has great potential. The first thing we can do is support holding and exchanging Ether as a currency. As for Ethereum, we have no corresponding plans.

Some other members of the Bitcoin community share Pereira’s sentiments.

Ledger co-founder Thomas France sees his company’s support for Ethereum as a necessary step to apply its technology to the blockchain. Ledger recently announced a partnership with Eris Industries, which will provide blockchain solutions licensed by Eris Industries.

“The core of our business is providing developers and enterprises with ways to take advantage of secure hardware,” France told CoinDesk.

Although the platform’s creators point out that Ether is not a payment method or a store of value, there are still companies in other industries that provide services to traders who buy and sell Ether as if it were a digital currency.

Expanding into new markets

Most of the companies interviewed said they are mainly focused on expanding into new areas. In their view, Ethereum may bring opportunities for them to expand their respective market share. At the same time, Bitcoin as a digital currency seems to be stagnant.

For example, Bitgo engineer Jameson Lopp mentioned that bitcoin wallet and security experts are discussing whether to develop dedicated wallets for blockchain platforms, but he pointed out that such discussions are still in the early stages.

“Our business is to help people securely use crypto, and it depends on how much demand there is from institutions to keep Ethereum safe.”

Not all companies focusing on Ethereum have a long-term and firm plan. Charles Allen, CEO of a company specializing in Bitcoin mining equipment, said that in view of the surge in the price of Ethereum, his company will customize Ethereum mining equipment as one of its trial operation projects.

In recent weeks, Ethereum has become a more volatile currency, reaching as high as $13, up about $10 from six months ago. Allen pointed out that given his company BTCS's background in manufacturing hardware facilities for Bitcoin mining, BTCS is ready to launch supporting equipment for Ethereum mining. "It is now impossible to ignore the existence of Ethereum. At this price level, Ethereum's market value is a total of $1 billion."

He went on to point out that the pilot project is designed to test whether Ethereum mining is profitable. The background of the project is based on Ethereum’s planned transition from proof-of-work to proof-of-stake mining, which means that transaction verification will eventually no longer require corresponding hardware facilities.

He also said that Ethereum currently runs on graphics processors, which provides an opportunity for their company to resell hardware equipment.

“This is an opportunity for us. We can’t keep mining on Ethereum, but we can seize the opportunity to enter and make a fortune.”

An "unfortunate" attempt

During the interview, the Ethereum project representative expressed his mixed emotions about the current situation.

Ethereum founder Vitalik Buterin has mentioned that he is disappointed with the current companies involved in the Bitcoin industry, and that from the way they use the technology, these companies do not really understand the essence of the Ethereum platform.

He told CoinDesk:

“Some of these companies are taking a very simplistic approach and thinking that if they accept bitcoin, they can just accept ether, which is true but unfortunate. The plan is to develop blockchain in all aspects, not just currency.”

Buterin said that many companies in the industry do not really understand the value proposition of the Ethereum platform, which is more abstract than Bitcoin and, to some extent, poses a threat to the business model of certain industries.

“A more traditional business might ask if we can accept ether. But that’s not the point. The point is that the business will be replaced by smart contracts that run completely autonomously and without fees,” he said.

In addition, regarding the problems existing in the Ethereum ecosystem, Buterin pointed out that he hopes that innovators inside and outside the Bitcoin circle can solve them.

As examples, he noted that centralization in ethereum mining pools and novel wallet applications could benefit from the knowledge of other open-source tech communities.

Wait and see

Interviews show that this brings opportunities to related industries, even those that are just starting to enter the Ethereum industry

For example, Andrew Lee, CEO of bitcoin exchange Purse, said his startup is accepting ether, but is already exploring how Ethereum can automate certain parts of online commerce processes and as part of future supply chains.

Lee suggested that it remains to be seen whether smart contracts and similar applications can become a use case for ethereum, or whether efforts to replicate this functionality on blockchains (RSK Labs has received $1 million in funding) are successful.

“I think what I can foresee is that Bitcoin is limited, and when we get to that point, Ethereum will be a very good choice,” Lee said.

Others note that this process of exploration will take time. As the project matures, the ecosystem will hopefully continue to find ways to use Ethereum.

Pereira added:

“With Ethereum, we’re all still trying to figure out what it is.”