What Does ERC20 Mean for Ethereum?
It's time to have a chat about Ethereum.
For those of you new to the digital currency world, Ethereum is a force to be reckoned with.
The second biggest digital currency by market cap, Ethereum is famous because it provides a platform for developers to build something called decentralized applications, or DApps. Put simply, decentralized applications are scalable applications that can exist without a middleman. They go directly from developer to consumer.
Since its creation in 2016, Ethereum has become the backbone of many major decentralized applications, including Golem and Storj. And this has made it a major player in the 2017 digital currency market.
This allowed Ethereum's native digital currency, ether, to increase in value dramatically over the course of the year.
Right now, however, Ethereum investors have been getting pretty antsy.
Despite its uniqueness in the space, Ethereum is not immune to market corrections and stomach-churning volatility. In just a few months, Ethereum has lost over two-thirds of its value from its all-time high. And that's a lot to stomach.
That said, Ethereum's future is looking brighter.
Major digital currency software wallet Coinbase just announced that it would be building out ERC20 support, which indicates to investors that the next digital asset to be hosted on the Coinbase or GDAX exchange will be Ethereum-based.
This is a huge victory for Ethereum, its developers, and the underlying technology. And we are going to go more into that in a minute.
But first, let's take a look at the history of the Ethereum network, how it functions, and some of Ethereum's competitors.
Only then will you start to see why Coinbase decided on ERC20 support over anything else.
What is Ethereum?
It's important to get one thing clear right off the bat: Ethereum is not Bitcoin.
Bitcoin is a blockchain-based peer-to-peer digital currency. It allows individuals to move money between each other without having to interact with a third party.
In this, Bitcoin is revolutionary. However, it is really just the tip of the iceberg when it comes to blockchain technology.
Ethereum's creator, Vitalik Buterin, developed Ethereum with a bit more in mind. He took the possibilities of Bitcoin's blockchain and gave them a kick-start.
As I stated above, the Ethereum network is a decentralized platform that allows developers to build DApps. DApps use blockchain technology to eliminate the middleman, cutting the need for excess resources and reducing operational costs.
The Ethereum platform is capable of executing something called a "smart contract."
A smart contract is a set of parameters in the code. For an action to take place, these parameters need to be met. It also makes sure a transaction is secure for both parties because money will only move if the parameters are met.
The Ethereum network's ability to execute smart contracts currently makes it one of a kind on the market.
It's allowed Ethereum to garner a huge network of corporate support, which is united in the Enterprise Ethereum Alliance, or EEA.
Current supporters of the Ethereum network include JP Morgan, Intel, and Microsoft.
And all this corporate attention has made other blockchain companies a bit envious, which has led to some of Ethereum's biggest competitors.
Does Ethereum Have Competition?
One of the things many investors love about the digital currency market is that innovation is happening quickly and constantly.
This kind of rapid innovation has laid the groundwork for new digital assets, including Ethereum rivals.
Two of the most notable Ethereum rivals are EOS and NEO.
EOS is a decentralized blockchain network developed by block.one. In theory, the blockchain architecture behind the project could facilitate up to a million transactions a minute.
Block.one emphasizes that EOS's blockchain is scalable and flexible, making it good for a wide range of businesses.
Currently, the EOS network is not operational. Block.one conducted an initial coin offering using the Ethereum blockchain, and it's unclear whether the tokens made available in that ICO will be rolled over onto the EOS blockchain.
The tentative launch date for the EOS network is in June 2018.
Another major competitor is NEO, otherwise known as the Ethereum of China.
NEO was launched in 2014 under the name Antshares. In 2017, the digital network was rebranded as NEO. It was founded by a developer named Da Hongfei. The goal of the NEO network is to provide the foundation for what its developers are calling a "smart economy."
NEO has managed to grab the interest of multiple large corporations. Confirmed parties interacting with the blockchain network include Red Pulse. Alibaba is one of the blockchain's rumored supporters.
Currently, neither NEO nor EOS has reached the same level of popularity as Ethereum. NEO's team focused on translating and distributing its China-based blockchain to the rest of the world in 2017, but Ethereum has maintained its lead.
And that brings us back to Coinbase's recent announcement about ERC20 support, which only solidifies Ethereum's role as the decentralized application king.
Why Does Coinbase's ERC20 Token Support Matter?
There are quite a few reasons Coinbase's announcement of ERC20 support should matter to Ethereum investors.
For starters, it indicates that more tokens will be coming to the GDAX and Coinbase platforms in the near future. It also indicates that, while the name of the next token has not yet been announced, it will more than likely be a token built on the Ethereum platform.
Dozens of digital assets have been built on the Ethereum platform, including OmiseGo, VeChain, Golem, and Storj. If you want to find a comprehensive and constantly updated list, you can go here.
Outside of the addition of new Ethereum-based assets to Coinbase, ERC20 support could also put more blockchain projects on the Ethereum blockchain in the future.
After all, if history has demonstrated anything, it's that Coinbase has a remarkable influence on the value of certain digital assets. When new tokens hit the exchange, they become available to a wide range of investors who don't want to deal with secondary exchanges. Because of this, the price of new assets added to the exchange tends to skyrocket.
And that is a lot of incentive to the blockchain companies developing them.
We will keep investors up to date on both Coinbase and Ethereum in our weekly news updates.
Until then, best of luck with your investments,
@AlexandraPerryC on Twitter
Alexandra Perry is the managing editor of Token Authority and the associate editor of Technology and Opportunity. She also contributes weekly content to Wealth Daily, a free investment research newsletter that addresses a range of market topics. She has multiple years of experience working with startup companies, primarily focusing on artificial intelligence, cybersecurity, alternative energy, and biotech. Her take on investing is simple: a new age of investor can make monumental returns by investing in emerging industries and foundational startup ventures.