Week in Ethereum News
August 21, 2016

Opening Thoughts – Why Ethereum Has Value

Ether’s value comes from two things: 1) it is the native currency (“fuel”) for Ethereum’s decentralized application platform, and 2) it could become the payment method for the backbone of the Internet of Things.

Yet, as one of Ethereum’s key researchers Vlad Zamfir told a journalist recently, “There’s still technical problems. It doesn’t scale. It’s not efficient. It’s not secure. It sucks, basically. It’s shitty technology.”

It’s important to keep in mind that Ethereum’s virtual machine is basically a decentralized computer that is about as powerful as a computer from decades ago. Hence, much of Ethereum’s current value is speculation into how successful the project will be at improving on the challenges Vlad identified – scalability, efficiency, and security.

Let’s Talk Token Sales

If you think these problems are solvable, then presumably many of the early decentralized apps (dapps) will be quite successful.  As Demian Brener writes:

  • Companies we’ve never heard of are IPO’ing before our very eyes. Instead of ringing the IPO bell after multiple years of operations, they are public from day 1. And instead of raising money by selling their company stock, they build distributed networks and sell their own tokens.

On the other hand, London lawyer Preston Byrne wrote a counterpoint: Against Tokens (and token Crowdsales).  While I don’t agree with his viewpoint, it’s worth a read: some of the upcoming crowdsales and ICOs will be done by hucksters and scammers.  

Caveat emptor.  Don’t put value at risk without due diligence.  Let’s avoid more instances of TheDAO.

Upcoming crowdsales?

The upcoming sale most interesting to me is Golem.  They bill themselves as (in my words) “Uber for computing power.”   In other words, decentralized AWS.

I’m fascinated by the idea, but I haven’t yet sussed whether this means “decentralized spot instances on AWS” (i.e., I have a 3 hr job I need to throw some CPUs/GPUs at) or fully “decentralized AWS”  (i.e., I can host my startup on Golem. And maybe at relatively reasonable prices?)

EASY PREDICTIONIn the coming months, we will see a flood of crowdsales, even from previously unknown projects.  That’s part of the reason I started this email list – I figure if I research a bunch of these, I may as well share my opinions.

Ok, crowdsales = Ethereum as app platform.  What about Ethereum as Internet of Things backbone?                                    

Instant, fee-less transfers.

Huge deal.  If they pull this off, it is quite conceivable that Ethereum becomes the default choice for the Internet of Things.

To quote a comment on Reddit:

  • Imagine when 1bn+ IoT devices are sending micro transactions back and forth. In a case like this it would be very convenient that they don’t have to pay any fees, that the transactions happen right away, and that the main Ethereum blockchain isn’t bloated with millions of transactions per day.
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