Ethereum, often thought of as Bitcoin’s little brother, has surged at an incredible pace since the start of 2017. On March 13, 2018, Ethereum traded at $696.00. Though this may be substantially lower than Bitcoin’s March 13th price of $9,272, Ethereum’s rise over the past 14 months has been much greater. At the start of 2017, Ethereum’s price was about $8. Turning an $8 investment into nearly $700 in 14 months may sound like a speculator’s pipe dream, but it happened. With returns like that, it’s no wonder so many initial coin offerings (ICOs) are coming onto the market.
Ethereum has had some difficulties, including a bug in the popular Ethereum wallet Parity, as indicated by Sean Schroeder in a writing on Mashable, Ethereum may also be a candidate for its own derivatives market. Bitcoin derivative trading opened late in 2017, driving a major surge in Bitcoin pricing.
Derivatives are traded on futures exchanges like the Chicago Board of Trade. Traders of derivatives contracts bet on the price movement of the underlying instrument over a specified period of time. If the price rises above or falls below a price that the trader selected, the trader makes money. If the price fails to move as the trader expected, he or she pays the trader on the other side of the contract. Derivatives contracts provide the opportunity for traders to make money from the underlying instrument’s price swings, without owning the instrument.
One key difference between Ethereum and Bitcoin is that Ethereum’s blockchain can run the coding for any decentralized application, while Bitcoin’s blockchain supports only peer-to-peer Bitcoin transactions, according to BlockGeeks, Ethereum also uses smart contracts. Smart contracts allow for automatic exchange when certain conditions are met, while also protecting against fraud and third party interference.
IBM, JP Morgan Chase, R3 and others are experimenting with Ethereum in their technology labs, according to an article by Prableen Bajpai in an article on Nasdaq, Major enterprises have also established the Ethereum Enterprise Alliance (EEA). The EEA intends to develop Ethereum as an enterprise-grade technology. EEA members include Microsoft, Credit Suisse, Intel, JP Morgan Chase, UBS, Santander, ING, CME, BNY Mellon, Accenture, and Wipro. Such backing bodes well for Ethereum. Clearly, experts in the financial and technology sectors view Ethereum’s capabilities as going beyond a simple cryptocurrency.