In this week’s “Penning Down The Thoughts” series, Jimmie is taking the Pen team (and the readers), to the story of a young Russian-Canadian programmer and how he created the most disruptive technology and financial innovation in history (apart from the blockchain technology & bitcoin, and internet…and the discovery of fire…and sliced bread of course). The system that changed how companies agree, startups raise funds and reward its users. Have a good read.
VITALIK BUTERIN AND ETHEREUM (ETH)
Back in 2014 vi saw, a young kid, age 19 with the following:
Just 19 years old, Vitalik was on a mission to make money programmable. Vitalik is a very very smart guy. The thing about Vitalik is he has been pushed away from Bitcoin because he had gone to Bitcoin Core developers and tried to build Ethereum on top of Bitcoin. And they said nope, not interested. So he built a separate blockchain called Ethereum, with its currency called Ether ( ETH). A comparison might be
Bitcoin is like a spreadsheet, and Ethereum is like a spreadsheet with macros. Using our analogy, Ethereum allows you to store cryptocurrency and computer code in the same secure box.
SMART CONTRACTS OR DIGITAL AGREEMENTS
Here's how a smart contract might work.
I will bet with my dad that bitcoin is going to 50.000$ before my birthday on April 16, 2024. We each put an ether into a box along with a smart contract, a simple program that automatically checks the price of Bitcoin on that future date. If I'm right, the money goes to me and my wallet. If I'm wrong, it's sent to my dad’s wallet.
A smart contract is neither smart nor a contract. It's a mindless program, and once you understand that it is a mindless program, it clarifies a lot of stuff, and the word contract there is in the meaning of finance. Most financial arrangements are pretty simple and clear-cut. A bet with my dad, your home loan, and insurance policy, just two parties and some form of exchange of value based on a set of rules called a contract. The same is true for global financial markets.
ICO VS IPO
Vitalik Buterin funded his project by selling Ether (ETH) for bitcoins 2000 Ether for 1 BTC and used a model that later got the name ICO´s - initial coin offering and used an ERC-20 standard token model.
IPOs and ICOs sound similar, but they have nothing in common. The only thing similar about them is they both help you raise money. IPOs, you're not able to raise capital through a public offering, until you have a company until you have revenue until you have users, and until you can prove to the public investors that this is a valuable company that's worth investing in, and it's worth buying their stock.
ICOs are pre-products, you can look at it like a sophisticated crowdfunding campaign. You have maybe a couple of people on the team. The whole project is built on "just" a white paper, which is a very illustrative business plan, and backers back based on faith and trust.
And this is the guy who opened the floodgates, Fabian Vogelsteller, father of the ERC-20 Standard enabling you or me or anyone to create an ICO. So on one hand, you have these smart contracts, these little programs that can talk to each other, but on the other hand, you have to define how they talk to each other. And because everybody now agrees to that same standard, smart contracts can interact within the entire Ethereum network and the ERC-20 standard allows the creation of tokens.
Vitalik Buterin said “The goal here is like, ultimately, I'd like to see eight-year-olds building their financial systems. So let's say I'm trying to do an ICO, and I create a smart contract where I create a million coins, and one of the transactions is that if you send me $100, I will send you that many worths of coins."
It was a mad gold rush. People realized wow if I can just pull together a project and a white paper, I can raise money. Some say 3-5 % were scams, I believe that 3-5 % were not scams.
Penning down the thoughts” is a series compiled by the CEO and Co-Founder of Penning, Jimmie Hansen Steinbeck. A compilation of his vast experience, knowledge, failures, successes, know-how & ideas. Jimmie has spent the last decade (almost since the birth of bitcoin), working in the crypto, blockchain (also known as Web3) space, as an investor, entrepreneur, and expert advisor to numerous crypto companies.
