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Blockchain Updated: 31 Oct 2018

Ethereum: a platform for smart contracts

Ethereum is a platform developed in open-source code that uses blockchain technology and has the capacity to create and execute so-called ‘smart contracts,’ which allow making secure and efficient transactions without intermediation.

It is one of the most used technologies to develop and deploy blockchain systems (decentralized ledgers) in corporate environments. Jeremy Millar, founder of Enterprise Ethereum Alliance (EEA), an international initiative based on Ethereum, explained that “companies are inclined toward open-source implementations that involve a single standard, an ecosystem that develops quickly and access to talent.” Ethereum owes its existence to the research of the Russian-Canadian programmer and expert in computer science, Vitalik Buterin.

In fact, the interest in taking advantage of blockchain’s possibilities and distributed ledgers in the business world has led to a group of companies of several sectors to create the EEA. The objective is none other than sharing practices and creating reference standards and architectures based on the Ethereum platform, to apply them to the corporate world. BBVA is a founding partner of EEA, along with other important names like Microsoft, JPMorgan, ThomsonReuters and Fidelity.

From EEA, the different corporations that were already using Ethereum want to establish the guidelines that permit the interconnection between the different networks of each company, in a way that can be understood between them and avoid the emergence of isolated blockchain platforms or those in the form of silos. BBVA has already developed different pilot projects based on the Ethereum platform.

“EEA is the key to creating common standards that are going to allow incorporating blockchain advantages into business processes securely and efficiently”, said Carlos Kuchovsky, CTO of New Digital Businesses at BBVA.

Smart contracts

Ethereum includes a programming language that allows for the creation of decentralized applications to record transactions of different assets: financial, real estate, etc. These are the so-called ‘smart contracts’ that are pieces of computer code that are executed if a pre-established condition occurs, such as, for example: Team A won, so those who gambled on team A are paid automatically. The terms of this contract are stored on Ethereum and are signed cryptographically by the intervening parties.

Other Ethereum applications are increasingly being explored in the financial-economic sector, and also in real estate, given that it can be used to record and transmit ownership. Experts even predict that in the near future, real estate transactions will be possible to be carried out as if they were an email. They ensure that it will be possible to make paying rent automatic, for example, eliminating the need for intermediaries.

The other ‘bitcoin’

The currency of the Ethereum platform is known as ‘ether’. While MIT Technology Review describes it as “bitcoin’s little sister,” ether promises greater potential. Among its advantages, experts point out that bitcoin has a limit of 21 million coins in circulation, while the creation of ethers appears to be unlimited.

However, both currencies have a problem in common: the lack of regulation and oversight by official agencies. While this may be attractive for some investors, it is also the reason for its exchange rate being extremely volatile.