Ethereum: The Birth of a Digital Renaissance?
In the late Middle Ages, Italy was composed of various city-states: small, independent merchant republics dependent on commerce and trade to acquire wealth and power. No centralized political structures represented Italy as a whole, and each city-state boasted their own form of currency. In the banking powerhouse of Florence, it was the florin. In maritime-focused Venice, it was the Ducato. All transactions were carefully recorded through an innovation known as double-entry bookkeeping, allowing city-states to abandon feudalism for early capitalist principles. And through the realization of financial and cultural autonomy, these regions were able to fuel artistic advancement, leading to the birth of the Renaissance.
Today our new version of double-entry bookkeeping is blockchain technology. Using this advancement, anyone with the know-how can declare possession of their own city-state, with the opportunity to create a currency, engage in commerce and construct their own republic — one that’s turned its back on feudalism. It’s an option that’s been available since 2015.
This public experiment, known as Ethereum, is an “open software platform based on blockchain technology that enables developers to build and deploy decentralized applications.” Its cryptocurrency, Ether, is often grouped in with Bitcoin; however, the two couldn’t be more different. Bitcoin is a peer-to-peer electronic cash system; Ethereum is a mother of digital city-states in possession of their own constitution, central bank and market. Ether is merely the financial fuel that keeps it running — its sugar daddy, if you will.
The journey starts with your Ethereum Wallet, which ultimately connects you to Ethereum’s blockchain. You may then create your puzzle-based cryptocurrency, or traceable token with fixed supply. In the process, you’ll devise a smart contract — the constitution or set of rules you mean to enforce. And instead of relying on humans to manage these digital contracts, which may be considered a form of feudalism, an artificial intelligence is used instead. This self-operating program automatically follows coded rules outlined in the contract, ensuring actions are taken according to terms of the agreement.
As Ethereum’s founder, Vitalik Buterin, explained during a recent TechCrunch interview, “On Ethereum, you can literally send a bunch of Ether into a computer program and the computer program itself has the unilateral ability to control where the money goes.” He compares this function to that of a vending machine, which also follows specific rules. “You put in two dollars, water comes out. If you don’t put in two dollars, water should not come out. And if you do get water without putting in two dollars, that’s bad.” Buterin argues that, by maintaining and enforcing such rules, smart contracts can protect digital assets — especially with the added security of cryptography.