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Meet Ether, The Bitcoin-Like Cryptocurrency That Could Power The Internet Of Things

Plus, the devices will make money on their own.

Meet Ether, The Bitcoin-Like Cryptocurrency That Could Power The Internet Of Things
[Photo: Flickr user Kevin Dooley]

At CES this past January, IBM researcher Veena Pureswaran described the company's joint plan with Samsung to get home appliances to exchange cryptocurrency with one another. The currency, called Ether, is similar to bitcoin, except that the traded commodity isn’t directly related to a financial value. Instead, Ether’s value is computing power.

What distinguishes the Ether and bitcoin cryptocurrencies from traditional money is the online system that records their every trade. Networks of people called miners use the software to collectively verify and record these cryptocurrencies' every trade. Like ever-growing strands of DNA, the currencies' digital addresses, called blockchains, store the details of each trade. Bitcoin and Ether run on their own software platforms, but in both cases, a blockchain makes the whole idea possible.

Letting connected devices barter computing power in the Ether cryptocurrency would address a basic issue of the coming Internet of Things era: paying for the cloud services that will allow devices to do useful things and talk to each other. Instead of relying on ads, fees from paying users, or selling data to third parties, hardware makers could use Ether as the basis for device-to-device communications and transactions.

Ether would blanket all of a connected home’s devices in a network of code to minimize computing costs, reduce the scale of operation, maximize device longevity, and guarantee consumer privacy for all stakeholders in a connected future. In short, Ether could be the Internet of Things’s wonder drug.

The Blockchain’s Evangelist

The company that is helping IBM and Samsung bring connected objects into Ether is Ethereum. Founded in 2014 by a group of bitcoin enthusiasts—including a 2014 Thiel Fellow named Vitalik Buterin—Ethereum is promoting a more widespread use of blockchain technology: blockchain applications for everything. Using Ethereum’s platform, coding a blockchain application should be as easy as creating a webpage in HTML.

Ethereum has built an open-source software platform that any coder can use to write blockchain-based applications. Additionally, anyone can join Ethereum’s network and offer up a computer’s computing power to the network. Then, the applications that are built on Ethereum’s software platform run on the collective power of all the computers that have joined Ethereum’s network, rather than in one centralized datacenter.

Ethereum’s chief communications officer, Stephan Tual

"Basically, what we’re doing is building the world’s biggest computer," says Stephan Tual, Ethereum’s chief communications officer. He imagines a scenario where more and more people will volunteer their desktops’ computing power to run programs that were built on Ethereum’s software platform.

For Tual, the premise behind evangelizing the blockchain isn’t to dissolve a centralized source of power for political reasons, like Bitcoin was conceived to do; it’s to help businesses save the money and effort they would need to run these Internet of Things applications in the cloud. Ethereum is making the blockchain a reality for some of tech’s biggest players.

"What Ethereum offers is really making it easy to build this stuff without needing to worry about cryptographic principles that are, quite frankly, obscure for most developers," says Tual.

The number of computers—and computing power—on Ethereum’s network is growing.

A Really Slow, Really Big Computer

There are applications that don't lend themselves to blockchains, such as playing video games or running other applications that require similarly substantial computing resources. "Ethereum is a really slow computer. It’s a very big computer that always tells the truth, which is quite interesting, and also has no downtime, which is another cool property it has. But it is pretty slow, compared to your laptop, for example. Because it’s the lowest common denominator that determines how fast it’s going to run," Tual says.

But blockchain technology is perfect for simple tasks that need to run constantly. Connected devices that perform crude, repetitive tasks, like monitoring temperature or turning lightbulbs on and off, would benefit the most from the blockchain’s peer-to-peer networking.

IBM and Samsung have employed Ethereum in their joint Internet of Things project called ADEPT, which stands for Autonomous Decentralized Peer-to-Peer Telemetry. Along with Ethereum, the companies plan to use two other peer-to-peer applications in the project: Telehash for inter-device messaging and BitTorrent for inter-device file sharing. Ethereum will execute code between the devices.

"The reason that they need this stuff is that they don’t want to pay," Tual says, laughing. "It’s not altruism. They don’t want to pay for its maintenance."

Mist, a graphical user interface for Ethereum's software platform.

Ether’s Value

Ethereum’s network of computers is growing every day, as members are rewarded with CPU power for breathing life into Ethereum's web of applications.

And the Ether cryptocurrency holds clear financial value to the people who are developing the Ethereum platform. Last summer, the company made $18 million on a pre-sale of Ether. That money now pays the salaries of Ethereum’s London-based management team, as well as its 30 developers in Berlin and Amsterdam.

While Ethereum will eventually spend that initial pre-sale fund, Tual hopes the company will reap the rewards of the foundation he says it's currently laying for the Internet of 20 years from now. He says that Ether will most likely always be associated with a monetary value as long as humans develop the code for the blockchain applications. So long as there is demand to run these applications, Ether's supply of available computing power will be valuable.

ADePT’s live demo at CES 2015

If ADEPT becomes reality, connected gadgets will also govern how much Ether their code will merit. "In doing so, devices can become revenue-generating opportunities in their own right," IBM’s Pureswaran says.