Cryptocurrency: 8 Finance Heavyweights Invested In Crypto

The year 2020 will have marked a profound change in the outlook for many fund managers. In the spring, and then in the fall in particular, many institutional investors came forward on cryptocurrencies. A main motivation for these managers is the safe haven nature of virtual currencies, and in particular Bitcoin . There are many comparisons with gold by institutional investors. In addition, there are several triggers: PayPal's announcement in a press release indicating its intention to allow customers "to buy, sell and hold bitcoin and other digital assets, using the company's online wallet accounts," opening up famous JP Morgan bank to crypto currencies with in particular among its customers two large crypto and bitcoin exchanges ( Coinbase and Gemini), the (next?) launch by Facebook of its own virtual currency (the Diem), etc.

Discover in this article 8 managers of hedge funds and traditional funds who invest in virtual currencies.

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STANLEY DRUCKENMILLER: BITCOIN AS A SAFE HAVEN

Stanley Drukenmiller is the former President and Founder of Duquesne Capital which has managed up to $ 12 billion in assets. In early November 2020, in an interview for CNBC , Stanley Drukenmiller revealed his position in favor of cryptocurrencies, mainly Bitcoin.

He exposes his interest in cryptocurrency because of its nature as a safe haven . For him, the 13 years of Bitcoin's existence and its gradual democratization are interesting signals. Although he insists that he holds far more gold than Bitcoin, his interest in cryptocurrency has not gone unnoticed.

PAUL TUDOR JONES: BITCOIN AS A HEDGE AGAINST INFLATION

Paul Tudor Jones is the famous billionaire manager of Tudor Investment Corp. He started recommending Bitcoin in the spring and made a public statement in the fall. On the Squawk show on CNBC , Paul Tudor Jones revealed that he has 1% to 2% of his assets in crypto.

For him, Bitcoin acts as a protection against inflation in the same way as gold. Its positioning on crypto currencies is justified by concerns about inflation due to monetary policies.

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RICK RIEDER: CRYPTOCURRENCY AS A FUND TREND

Rick Rieder is the Chief Investment Officer (CIO) at BlackRock, the world's largest manager. According to Forbes, Rick Rieder is at the head of a management of $ 1,200 billion. Like Tudor Jones, he compares Bitcoin to gold and also highlights the interest it arouses among younger generations. He insists in particular on the sustainability of the crypto currency:

“I think cryptocurrency is here to stay. I think it is sustainable and we have seen it with central banks opening up to digital currencies ”.

BILL MILLER: BITCOIN, IN HIGH DEMAND AND SUBJECT TO LIMITED SUPPLY

Bill Miller is a fairly famous fund manager. He is notably the former CIO of Legg Mason Capital Management. In an interview with Business Insider , Miller revealed his interest in cryptocurrencies, mainly Bitcoin.

Several reasons push him to defend cryptocurrency. First, the fact that demand is growing faster than supply, which supply is structurally limited. To this he also adds concerns about inflation due to monetary policies. Bill Miller thus draws the parallel between Bitcoin and gold or certain commodities, considered as safe havens:

"I think all the big banks, all the investment banks, all the big high net worth companies, are going to end up getting exposure to bitcoin or whatever it is like, which is gold or other raw material. "

ERIC PETERS AND ALAN HOWARD: AN INCREASE IN POSITIONS ON ETHER AND BITCOIN

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Eric Peters is the CIO of One River Asset Management. At the end of 2020, he announced that he had bought nearly $ 600 million worth of Bitcoin and Ether . The fund plans to increase its positions to $ 1bn in 2021.

For his part, Alan Howard is an English billionaire, co-founder of the hedge fund Brevan Howard Asset Management. Alan Howard has already invested in Bitcoin. Recently, he showed his indirect interest in virtual currency with Brevan Howard's acquisition of 25% of One River Asset Management in October.

JP MORGAN: PRO CRYPTO MANAGERS?

In 2017 and 2018, JP Morgan Chairman Jamie Dimon was among the most critical of cryptocurrencies. He has now revised his position, and JP Morgan has even established himself as a defender of the rise in cryptocurrencies.

It must be said that JP Morgan launched its own crypto currency, JPM Coin, indexed on the dollar, in order to allow transactions between institutions.

In addition, in a note relayed by Bloomberg , analysts at JP Morgan asserted that “if pension and insurance funds in the United States, the United Kingdom, the euro zone and Japan allocate 1% of their assets in Bitcoin, this would generate an additional demand of 600 billion ”, ie 3 times the capitalization of Bitcoin in the fall of 2020.

BLACKROCK DOES NOT WANT TO BE OVERTAKEN ON VIRTUAL CURRENCIES

BlackRock is the global asset management giant, approaching $ 7 trillion under management. Two recent elements have marked the attention of the crypto world: the recognition by Larry Fink, CEO of BlackRock, of the growing weight of crypto currencies on the one hand, and the inclusion of the Blockchain in the company's strategies. somewhere else.

Indeed, the world leader in management has launched a job offer aimed at recruiting a profile with at least one year of experience in order to " articulate the technological foundations of the Blockchain [...]". The fact that the total valuation of cryptos is approaching $ 1 trillion at the start of 2021 forces managers to take into account what could "possibly evolve in the global market" in the words of Larry Fink.

GOLDMAN SACHS IN THE CRYPTOCURRENCY RACE

Goldman Sachs appears to be following the same path as JP Morgan. In the summer of 2020, Mathew McDermott was appointed to lead the bank's digital assets. The latter said in an interview the possibility of launching a Goldman Sachs cryptocurrency:

“We are studying the commercial viability of creating our own digital fiat currency token, but we are only at the beginning as we continue to work on potential use cases. "

McDermott also showed his belief in developing a crypto industry. He spoke of a possible development of "a financial system where all the assets and liabilities would be grouped together on the Blockchain" within 5 to 10 years. Golman Sachs is thus entering a cryptocurrency race. Cryptocurrency race that is becoming highly financial, due to the position of many competitors.

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THE GROWING INTEREST OF THE FINANCIAL SECTOR IN ACTIVE CRYPTOS

The 2020 crisis has shown Bitcoin's resistance to uncertainties, which has motivated the interest of many hedge fund managers. In the fall of 2020, the growing interest of large investors in Bitcoin was manifested. Although some are still skeptical, such as Georges Soros or Ray Dalio, virtual currencies are increasingly perceived by these managers as a safe and technological asset. The largest banks and management companies are thus showing increasing interest in digital assets which, if only through their capitalization, are developing obvious financial and technological interests.

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Ethereum

From Wikipedia, the free encyclopedia

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Ethereum Logo

Original author(s)

Vitalik Buterin, Gavin Wood

Developer(s)

Ethereum Foundation, Hyperledger, Nethermind, OpenEthereum, EthereumJS

Initial release

30 July 2015; 5 years ago

Stable release

Muir Glacier / 1 January 2020; 13 months ago

Development status

Active

Software used

EVM 1 Bytecode

Written in

Go, Rust, C#, C++, Java, Python

x86-64, ARM

300 GB (2020-03)

Distributed Computing

License

Open-Source Licenses

Active hosts

10,335 (2021-01)

Website

ethereum.org

Ethereum is a decentralized, open-source blockchain featuring smart contract functionality. Ether (ETH) is the native cryptocurrency of the platform. It is the second-largest cryptocurrency by market capitalization, after Bitcoin.^[1] Ethereum is the most actively used blockchain.^[2][3]

Ethereum was proposed in 2013 by programmer Vitalik Buterin. Development was crowdfunded in 2014, and the network went live on 30 July 2015, with 72 million coins premined.^[4][5] The Ethereum Virtual Machine (EVM) is Turing-complete, can execute scripts and run decentralized applications.^[6][7] Ethereum is used for decentralized finance, and has been utilized for many initial coin offerings.

In 2016, a hacker exploited a flaw in a third-party project called The DAO and stole $50 million of Ether.^[8] As a result, the Ethereum community voted to hard fork the blockchain to reverse the theft^[9] and Ethereum Classic (ETC) continued as the original chain.^[10]

Ethereum has started implementing a series of upgrades called Ethereum 2.0, which includes a transition to proof of stake and an increase in transaction throughput using sharding.^[11][12]

History

Ethereum founder Vitalik Buterin in 2015

Ethereum was initially described in a white paper by Vitalik Buterin,^[13] a programmer and co-founder of Bitcoin Magazine, in late 2013 with a goal of building decentralized applications.^[14][15] Buterin argued that Bitcoin and blockchain technology could benefit from other applications besides money and needed a scripting language for application development that could lead to attaching real-world assets, such as stocks and property, to the blockchain.^[16] In 2013, Buterin briefly worked with eToro CEO Yoni Assia on the Colored Coins project and drafted its white paper outlining additional use cases for blockchain technology.^[17] However, after failing to gain agreement on how the project should proceed, he proposed the development of a new platform with a more general scripting language that would eventually become Ethereum.^[4]

Ethereum was announced at the North American Bitcoin Conference in Miami, in January 2014.^[18] During the conference, a group of people rented a house in Miami: Gavin Wood, Charles Hoskinson, and Anthony Di Iorio from Toronto who financed the project.^[18] Di Iorio invited friend Joseph Lubin, who invited reporter Morgen Peck, to bear witness.^[18] Six months later the founders met again in a house in Zug, Switzerland, where Buterin told the founders that the project would proceed as a non-profit. Hoskinson left the project at that time.^[18]

Ethereum has an unusually long list of founders. Anthony Di Iorio wrote: "Ethereum was founded by Vitalik Buterin, Myself, Charles Hoskinson, Mihai Alisie & Amir Chetrit (the initial 5) in December 2013. Joseph Lubin, Gavin Wood, & Jeffrey Wilcke were added in early 2014 as founders." Formal development of the software began in early 2014 through a Swiss company, Ethereum Switzerland GmbH (EthSuisse).^[19] The basic idea of putting executable smart contracts in the blockchain needed to be specified before the software could be implemented. This work was done by Gavin Wood, then the chief technology officer, in the Ethereum Yellow Paper that specified the Ethereum Virtual Machine.^[20] Subsequently, a Swiss non-profit foundation, the Ethereum Foundation (Stiftung Ethereum), was created as well. Development was funded by an online public crowdsale from July to August 2014, with the participants buying the Ethereum value token (Ether) with another digital currency, Bitcoin. While there was early praise for the technical innovations of Ethereum, questions were also raised about its security and scalability.^[14]

In 2019, Ethereum Foundation employee Virgil Griffith was arrested by the US government for presenting at a blockchain conference in North Korea.^[21]

Etymology

Buterin chose the name Ethereum after browsing a list of elements from science fiction on Wikipedia. He stated, "I immediately realized that I liked it better than all of the other alternatives that I had seen; I suppose it was the fact that [it] sounded nice and it had the word 'ether', referring to the hypothetical invisible medium that permeates the universe and allows light to travel."^[18] Buterin wanted his platform to be the underlying and imperceptible medium for the applications running on top of it.^[22]

Launch and milestones

Code name

Release date

Release block

Frontier

7/30/2015

Ice Age

9/8/2015

200,000

Homestead

3/15/2016

1,150,000

DAO Fork (unplanned)

7/20/2016

1,920,000

Tangerine Whistle (unplanned)

10/18/2016

2,463,000

Spurious Dragon

11/23/2016

2,675,000

Byzantium

10/16/2017

4,370,000

Constantinople

2/28/2019

7,280,000

Petersburg (unplanned)

2/28/2019

7,280,000

Istanbul

12/8/2019

9,069,000

Muir Glacier

1/1/2020

9,200,000

Berlin (planned)

TBD

Several codenamed prototypes of Ethereum were developed by the Ethereum Foundation as part of their proof of concept series. "Olympic" was the last prototype and public beta pre-release. The Olympic network provided users with a bug bounty of 25,000 Ether for stress testing the limits of the Ethereum blockchain. In July 2015, "Frontier" marked the tentative experimental release of the Ethereum platform.^[23]

Since the initial launch, Ethereum has undergone several planned protocol upgrades, which are important changes affecting the underlying functionality and/or incentive structures of the platform.^[24][25] Protocol upgrades are accomplished by means of a hard fork. The latest upgrade to Ethereum was "Muir Glacier", implemented on 1 January 2020.

The DAO event

In 2016, a decentralized autonomous organization called The DAO, a set of smart contracts developed on the platform, raised a record US$150 million in a crowdsale to fund the project.^[26] The DAO was exploited in June 2016 when US$50 million of DAO tokens were stolen by an unknown hacker.^[27][28] The event sparked a debate in the crypto-community about whether Ethereum should perform a contentious "hard fork" to reappropriate the affected funds.^[29] It resulted in the network splitting into two blockchains: Ethereum with the theft reversed and Ethereum Classic which continued on the original chain.^[30] The hard fork created a rivalry between the two networks. After the hard fork, Ethereum subsequently forked twice in the fourth quarter of 2016 to deal with other attacks.

Enterprise Ethereum Alliance

In March 2017, various blockchain startups, research groups, and Fortune 500 companies announced the creation of the Enterprise Ethereum Alliance (EEA) with 30 founding members.^[31] By May 2017, the nonprofit organization had 116 enterprise members – including ConsenSys, CME Group, Cornell University's research group, Toyota Research Institute, Samsung SDS, Microsoft, Intel, J. P. Morgan, Cooley LLP, Merck KGaA, DTCC, Deloitte, Accenture, Banco Santander, BNY Mellon, ING, and National Bank of Canada.^[32][33] By July 2017, there were over 150 members in the alliance, including MasterCard, Cisco Systems, Sberbank, and Scotiabank.^[34][35]

Ethereum 2.0

Code name

Release date

Release block

ETH 2.0 Phase 0 (Beacon Chain)

12/01/2020

ETH 2.0 Phase 1 (planned)

TBD

ETH 2.0 Phase 2 (planned)

TBD

Open-source development is currently underway for a major upgrade to Ethereum known as Ethereum 2.0 or Eth2.^[36] The main purpose of the upgrade is to increase transaction throughput for the network from the current of about 15 transactions per second to up to tens of thousands of transactions per second.^[37]

The plan is to increase throughput by splitting up the workload into many blockchains running in parallel (referred to as sharding) and then having them all share a common consensus proof of stake blockchain, so that to maliciously tamper with one chain would require that one tamper with the common consensus, which would cost the attacker far more money than they could ever gain from the attack.

Ethereum 2.0 (also known as Serenity) is designed to be launched in three phases:

"Phase 0" was launched on 1 December 2020 and created the Beacon Chain, a proof of stake (PoS) blockchain that will act as the central coordination and consensus hub of Ethereum 2.0.^[38][39][40]
"Phase 1" will create shard chains and connect them to the Beacon Chain.
"Phase 2" will implement state execution in the shard chains^[12] with the current Ethereum 1.0 chain expected to become one of the shards of Ethereum 2.0.

Design

Ethereum is a permissionless, non-hierarchical network of computers (nodes) which build and come to consensus on an ever-growing series of "blocks", or batches of transactions, known as the blockchain. Each block contains an identifier of the block that it must immediately follow in the chain if it is to be considered valid. Whenever a node adds a block to its chain, it executes the transactions therein in their order, thereby altering the ETH balances and other storage values of Ethereum accounts. These balances and values, collectively known as the state, are maintained on the node's computer separately from the blockchain, in a Merkle Patricia tree.

Each node communicates with a relatively small subset of the network, known as its peers. Whenever a node wishes to include a new transaction in the blockchain, it sends it to its peers, who then send it to their peers, and so on. In this way, it propagates throughout the network. Certain nodes, called miners, maintain a list of all of these new transactions and use them to create new blocks, which they then send to the rest of the network. Whenever a node receives a block, it checks the validity of the block and of all of the transactions therein and, if valid, adds it to its blockchain and executes all of said transactions. As the network is non-hierarchical, a node may receive competing blocks, which may form competing chains. The network comes to consensus on the blockchain by following the "longest chain rule", which states that the chain with the most blocks at any given time is the canonical chain. This rule achieves consensus because miners do not want to expend their computational work trying to add blocks to a chain that will be abandoned by the network.

Ether

Ether (ETH) is the cryptocurrency generated by the Ethereum protocol as a reward to miners in a proof of work system for adding blocks to the blockchain. It is the only currency accepted in the payment of transaction fees, which also go to miners. The terms "Ether" and "Ethereum" have become interchangeable in the cryptocurrency community.^[41] The block reward together with the transaction fees provide the incentive to miners to keep the blockchain growing (ie. to keep processing new transactions). Therefore, Ether is fundamental to the operation of the network. Each Ethereum account has an ETH balance and may send ETH to any other account. The smallest unit of ETH is known as a Wei and is equal to 10^-18 ETH. ^[42]

Ether is listed on exchanges under the ticker symbol ETH. The Greek uppercase Xi character (Ξ) is sometimes used for its currency symbol.

The shift to Ethereum 2.0 may reduce the issuance rate of Ether.^[43] There is currently no implemented hard cap on the total supply of Ether.^[44]

Accounts

There are two types of accounts on Ethereum: user accounts (also known as externally-owned accounts) and contracts. Both types have an ETH balance, may send ETH to any account, may call any public function of a contract or create a new contract, and are identified on the blockchain and in the state by their address.^[45]

User accounts are the only type which may create transactions. For a transaction to be valid, it must be signed using the account's private key, a 64-character hexadecimal string that should only be known to the account's owner. The signature algorithm used is ECDSA. Importantly, this algorithm has the property that it allows one to derive the signer's address from the signature without knowing the private key.

Contracts are the only type of account which has associated code (a set of functions and variable declarations) and contract storage (the values of the variables at any given time). Contracts are passive entities, only able to do anything as a result of an account calling one of its functions. During the execution of its code, a contract may: send ETH, alter its storage values, create temporary storage (memory) that dies at the end of the function, call any of its own functions, call any public function of a different contract, create a new contract, and query information about the current transaction or the blockchain.^[46]

Addresses

Ethereum addresses are composed of the prefix "0x", a common identifier for hexadecimal, concatenated with the rightmost 20 bytes of the Keccak-256 hash of the ECDSA public key (the curve used is the so-called secp256k1). In hexadecimal, 2 digits represent a byte, meaning addresses contain 40 hexadecimal digits, e.g. 0xb794f5ea0ba39494ce839613fffba74279579268. Contract addresses are in the same format, however, they are determined by sender and creation transaction nonce.^[47]

Virtual machine

The Ethereum Virtual Machine (EVM) is the runtime environment for smart contracts in Ethereum. It is a 256-bit register stack designed to run the same code exactly as intended. It is the fundamental consensus mechanism for Ethereum. The formal definition of the EVM is specified in the Ethereum Yellow Paper.^[47][48] EVMs have been implemented in C++, C#, Go, Haskell, Java, JavaScript, Python, Ruby, Rust, Elixir, Erlang, and soon WebAssembly.

Gas

Gas is a unit of account within the EVM used in the calculation of a transaction fee, which is the amount of ETH a transaction's sender must pay to the miner who includes the transaction in the blockchain.

Each type of operation which may be performed by the EVM is hardcoded with a certain gas cost, which is intended to be roughly proportional to the amount of resources (computation and storage) a node must expend to perform that operation. When creating a transaction, the sender must specify a gas limit and gas price. The gas limit is the maximum amount of gas the sender is willing to use in the transaction, and the gas price is the amount of ETH the sender wishes to pay to the miner per unit of gas used. The higher the gas price, the more incentive a miner has to include the transaction in their block, and thus the quicker the transaction will be included in the blockchain. For a transaction to be valid, the sender's starting ETH balance must be greater than or equal to gas limit × gas price. The sender buys the full amount of gas (ie. the gas limit) up-front, at the start of the execution of the transaction, and is refunded at the end for any gas not used. If at any point the transaction does not have enough gas to perform the next operation, the transaction is reverted but the sender still pays for the gas used. Gas prices are typically denominated in Gwei, a subunit of ETH equal to 10^-9 ETH.^[49]

This fee mechanism is designed to mitigate transaction spam, prevent infinite loops during contract execution, and provide for a market-based allocation of network resources.

Governance

On social governance

Our governance is inherently social, people who are more connected in the community have more power, a kind of soft power.

Vlad Zamfir, Ethereum core developer, The New Yorker^[18]

In October 2015,^[50] a development governance was proposed as the Ethereum Improvement Proposal (EIP), standardized on EIP-1.^[51] The core development group and community were to gain consensus by a process regulated EIP.^[52][53]

Difficulty bomb

The difficulty bomb is a mechanism where the difficulty of blockchain mining began increasing in November 2016, from block 200,000. This onset is referred to as Ethereum's Ice Age, which was implemented as an incentive for the network to transition from a PoW to a PoS blockchain. A difficulty bomb was scheduled in February 2019 but was pushed back by developers.^[54]

Comparison to Bitcoin

Ethereum is different from Bitcoin, the cryptocurrency with the largest market capitalization as of 2020, in several aspects:^[55][56]

Bitcoin is a singular form of digital money where users can send, receive, and hold only bitcoins. Ethereum is a smart contract platform which allows entities to leverage blockchain technology to create numerous different digital ledgers and can be used to create additional cryptocurrencies that run on top of its blockchain. For example, Ethereum can be used to create tokens that are pegged 1:1 with the value of the United States dollar (called a stablecoin) if a user wanted to transfer or hold the value of dollars on the blockchain. Ether itself can also be sent, received and held as digital money.
Bitcoin is aimed to only be money, compared with Ethereum where a goal is to also run applications (like the Google Play or Apple App store).
Its block time is 13 seconds, compared to 10 minutes for bitcoin.
Mining of Ether generates new coins at a usually consistent rate, occasionally changing during hard forks, while for bitcoin the rate halves every 4 years.
For proof of work (PoW), Ethereum uses the Ethash algorithm, which is intended to reduce the advantage of specialized ASICs in mining.
Transaction fees differ by computational complexity, bandwidth use, and storage needs (in a system known as gas), while bitcoin transactions compete by means of transaction size in bytes.
Ethereum uses an accounting system where values in Wei (the smallest denomination of 1 Ether, 1 ETH = 10¹⁸ Wei) are debited from accounts and credited to another, as opposed to Bitcoin's UTXO system, which is more analogous to spending cash and receiving change in return.

Applications

The EVM's instruction set is Turing-complete, meaning that Ethereum contracts can do anything that computer programs in general can do. Popular uses of Ethereum have included the creation of fungible (ERC20) and non-fungible (ERC721) tokens with a variety of properties, crowdfunding (eg. initial coin offerings), decentralized finance, decentralized exchanges, decentralized autonomous organizations (DAOs), games, prediction markets, and verifiably-fair gambling.

Contract source code

Ethereum's smart contracts are written in high-level programming languages and then compiled down to EVM bytecode and deployed to the Ethereum blockchain. They can be written in Solidity (a language library with similarities to C and JavaScript), Serpent (similar to Python, but deprecated), Yul (an intermediate language that can compile to various different backends – EVM 1.0, EVM 1.5 and eWASM are planned), LLL (a low-level Lisp-like language), and Mutan (Go-based, but deprecated). There is also a research-oriented language under development called Vyper (a strongly-typed Python-derived decidable language). Source code and compiler information are usually published along with the launch of the contract so that users can see the code and verify that it compiles to the bytecode that is on-chain.

One issue related to using smart contracts on a public blockchain is that bugs, including security holes, are visible to all but cannot be fixed quickly.^[57] One example of this is the 2016 attack on The DAO, which could not be quickly stopped or reversed.^[27]

There is ongoing research on how to use formal verification to express and prove non-trivial properties. A Microsoft Research report noted that writing solid smart contracts can be extremely difficult in practice, using The DAO hack to illustrate this problem. The report discussed tools that Microsoft had developed for verifying contracts, and noted that a large-scale analysis of published contracts is likely to uncover widespread vulnerabilities. The report also stated that it is possible to verify the equivalence of a Solidity program and the EVM code.^[58]

ERC-20 Tokens

The ERC-20 Token Standard allows for fungible tokens on the Ethereum blockchain. Numerous cryptocurrencies have launched as ERC-20 tokens and have been distributed through initial coin offerings.^[59] Fees to send ERC-20 tokens must be paid with Ether.

Non-fungible Tokens (NFTs)

Ethereum also allows for the creation of unique and indivisible tokens that cannot be directly exchanged for one another, called non-fungible tokens (NFTs).^[60] Since these types of tokens are unique, they have been used to represent digital art, sports memorabilia, virtual real estate and gaming.^[61] NFTs generally sell on the Ethereum blockchain through various digital auction websites. In 2021, Christie's began to sell NFT artwork.^[62]

Decentralized finance

Main article: Decentralized finance

Decentralized finance (DeFi) is a use case of Ethereum.^[63] It offers traditional financial instruments in a decentralized architecture, outside of companies' and governments' control, such as money market funds which let users earn interest.^[64] Examples of DeFi platforms include MakerDAO and Compound. Uniswap, a decentralized exchange for tokens on Ethereum grew from $20 million in liquidity to $2.9 billion in 2020.^[65] As of October 2020, over $11 billion was invested in various DeFi protocols.^[66] Additionally, through a process called "wrapping", certain DeFi protocols allow synthetic versions of various assets (such as Bitcoin, gold and oil) to become available and tradeable on Ethereum and also compatible with all of Ethereum's major wallets and applications.^[66]

Enterprise software

Ethereum-based software and networks, independent from the public Ethereum chain, are being tested by enterprise software companies.^[67] Interested parties include Microsoft, IBM, JPMorgan Chase,^[42] Deloitte, R3, and Innovate UK (cross-border payments prototype).^[68] Barclays, UBS, Credit Suisse, Amazon, and other companies are also experimenting with Ethereum.^[69][70]

Permissioned ledgers

Ethereum-based permissioned blockchain variants are used and being investigated for various projects.

In 2017, JPMorgan Chase proposed developing JPM Coin on a permissioned-variant of Ethereum blockchain dubbed "Quorum".^[71] It is "designed to toe the line between private and public in the realm of shuffling derivatives and payments. The idea is to satisfy regulators who need seamless access to financial goings-on while protecting the privacy of parties that don't wish to reveal their identities nor the details of their transactions to the general public."^[72]
The Royal Bank of Scotland has announced that it has built a Clearing and Settlement Mechanism (CSM) based on the Ethereum distributed ledger and smart contract platform.

Performance

In Ethereum, all smart contracts are stored publicly on every node of the blockchain, which has costs. Being a blockchain means it is secure by design^[^{clarification needed}^] and is an example of a distributed computing system with high Byzantine fault tolerance. The downside is that performance issues arise in that every node is calculating all the smart contracts in real-time, resulting in lower speeds. As of January 2016, the Ethereum protocol could process about 25 transactions per second. In comparison, the Visa payment platform processes 45,000 payments per second leading some to question the scalability of Ethereum.^[73] On 19 December 2016, Ethereum exceeded one million transactions in a single day for the first time.^[74]

Ethereum engineers have been working on sharding the calculations, and the next step (Ethereum 2) was presented at Ethereum's Devcon 3 in November 2017.^[75]

Ethereum's blockchain uses Merkle trees, for security reasons, to improve scalability, and to optimize transaction hashing.^[76] As with any Merkle tree implementation, it allows for storage savings, set membership proofs (called "Merkle proofs"), and light client synchronization. The network has faced congestion problems, such as in 2017 in relation to Cryptokitties.^[77]

References

^ "Ethereum Regains Title as Second Most Valuable Cryptocurrency Behind Bitcoin". Fortune.
^ "Ethereum Races Clock to Collect Enough Coins for Big Upgrade". Bloomberg.com. 23 November 2020.
^ "Ethereum Becoming More Than Crypto Coder Darling, Grayscale Says". Bloomberg.com. 4 December 2020.
^
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^a ^b Tapscott, Don; Tapscott, Alex (2016). The Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World. Portfolio. ISBN 978-0670069972.
^ Foundation, Ethereum (30 July 2015). "Ethereum Launches". blog.ethereum.org. Retrieved 9 January 2020.
^ Popper, Nathaniel (19 June 2017). "Move Over, Bitcoin. Ether Is the Digital Currency of the Moment. (Published 2017)". The New York Times.
^ "Vapor No More: Ethereum Has Launched". TechCrunch.
^ Waters, Richard (18 June 2016). "'Ether' brought to earth by theft of $50m in cryptocurrency". Financial Times. Retrieved 19 October 2018.
^ Leising, Matthew (13 June 2017). "Ether thief remains mystery year after $55 million heist". www.bloomberg.com. Bloomberg News.
^ De Jesus, Cecille (19 July 2016). "The DAO Heist Undone: 97% of ETH Holders Vote for the Hard Fork". Futurism, LLC. Archived from the original on 7 August 2017. Retrieved 16 May 2017.
^ "Ethereum 2.0 Specifications". Github. Retrieved 1 June 2020.
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^a ^b del Castillo, Michael. "Ethereum Cofounder Joe Lubin Talks Trump, Blockchain's 'Frankenstein' And Willingness To Work With China". Forbes. Retrieved 1 June 2020.
^ "White Paper· ethereum/wiki Wiki · GitHub". Archived from the original on 11 January 2014.
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^a ^b Finley, Klint (27 January 2014). "Out in the Open: Teenage Hacker Transforms Web into One Giant Bitcoin Network". Wired. Archived from the original on 18 March 2016. Retrieved 21 March 2016.
^ Schneider, Nathan (7 April 2014). "Code your own utopia: Meet Ethereum, bitcoin's most ambitious successor". Al Jazeera. Archived from the original on 23 February 2016. Retrieved 21 February 2016.
^ Russo, Camila (14 July 2020). The infinite machine : how an army of crypto-hackers is building the next internet with Ethereum (First ed.). New York, NY. pp. 40–44. ISBN 9780062886149.
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