As 2018 gets underway, the year is doing so on the back of a booming altcoin market.As far, however, as many investors are concerned, there are only two altcoins really worth their salt on the cryptocurrency market.
We’re talking of course, about Litecoin and Ethereum.
What often surprises cryptocurrency investors, is the fact that Ethereum isn’t actually a true digital currency.
Unlike digital currency like Bitcoin, the Ethereum blockchain isn’t limited to just being used as a virtual ledger. Instead, Ethereum also allows people to build executable apps on its blockchain called ‘Smart Contracts.’
In order to understand how Ethereum’s Smart Contracts work, it is important to first understand how blockchains themselves work.
Put simply, a blockchain is a decentralized ledger upon which no new information can ever be added or removed. All that can ever happen on a blockchain, is the recording of where one piece of information is at any one moment.
Needless to say, only being able to record movements of information limits blockchains to a large extent. What the Ethereum blockchain does, however, is allow transactions to trigger the execution of customizable computer programs. Moreover,what this means, is that the blockchain can be used just like a large decentralized virtual computer.
Because the ETH blockchain allows people to build executable programs on top of the ETH network, new startups use Ethereum to create everything from ETH based games to full-blown digital service applications. Applications themselves, however,can’t be run freely. This being the case, ETH coins are used as payment for network services (GAS) and execution of programs themselves.
Given the above, when investors and traders buy ETH at a cryptocurrency exchange,they don’t buy a digital currency which is intended for use in the real-world to buy a cup of coffee. Instead, they purchase tokens intended (at least originally) to be predominantly exchanged within the Ethereum ecosystem.
Having recently broken out past $1,000, many investors see a promising future for Ethereum. Like Bitcoin, however, the ETH blockchain is starting to suffer from significant scaling problems.The sheer volume of Smart Contracts currently being executed on the ETH blockchain is starting to lead to significant transaction bottlenecking. From an investment perspective, it would be wise, in this case, to keep close watch on how Ethereum seeks to scale better over the course of 2018. – This and have an exit strategy in place should current problems start to worsen.
