On 21 July 2016, Coinbase officially announced that it would be the first digital currency exchange to add support for Ether, the currency unit of Ethereum. This is significant towards developing the Ethereum ecosystem and one that has been well received within the cryptocurrency community. As a currency that has also attracted the interest of Barclays and other large financial institutions, it also shows promise for more mainstream use.
However, despite the news, critical questions still hang over the currency’s security in the wake of the DAO hack, or if indeed like Bitcoin, it will be regarded as more of a novelty payment method than one with commercial use. This article looks at whether these issues are being addressed and can be sufficiently resolved to allow for consumer adoption.
Bitcoin’s Consumer Advantages
Bitcoin’s daily transactions at the time of writing totalled 192,302.20, and this number has been steadily increasing from its launch.
A compelling reason for merchants to use Bitcoin is the lack of transaction fees incurred by credit card providers, banks and payment processors. This translates into costs savings on the consumer side and has also led to promotions offered by larger retailers to incentivise consumer bitcoin usage. Such a direct benefit would also result from the support of Ethereum as an accepted currency.
A public key is the only information shared when a Bitcoin transaction is made, giving customers the assurance that limited identifiable information can be gleaned from their transaction records. This is unlike credit cards where this data is more obtainable because it is processed through a third party. Again, ether transactions would offer the same protection to consumers.
As verification checks are not needed, Bitcoin also allows for a more simplified purchase experience, which usually only consists of a two click process. With internet access being the only condition required to make a transaction, mobile payments with the currency are facilitated greatly. Neither do forms requesting personal information need to be filled, meaning retailers cannot collect the same personal data they would through a more traditional payment method. This process could also be easily replicated in Ether transactions.
However, a major worry consumers associate with Bitcoin is its instability, given that its worth constantly fluctuates. Like Bitcoin, Ether also has this volatility and the value can vary wildly from transaction to transaction.
Dangers of Ether
The recent DAO hack and the widespread uncertainty in its wake, is still a cause for concern that consumers should be aware of. Given how uncharted the digital currency is, it may warrant the development of a unique set of governance rules before it can truly gain consumer confidence. However, in light of the fact digital currency is designed to be unregulated, it is currently unclear how such safeguards could be implemented through more traditional routes such as securities law legislation.
Looking to the current state of Bitcoin laws in Australia, it appears that there is a move towards classifying it as a regular currency, as opposed to giving it own unique regulation. At present, it is likely Ether will be treated the same way. However, it remains to be seen if this path by regulators will accommodate for the specific challenges peculiar to digital currency.
Still in its early days, Ether, while certainly displaying potential for commercial uptake, does not, as with all digital currency, yet have the widespread endorsement required to become a commonly used consumer currency. However, given the upwards trend in transactions processed using bitcoins, research into and the significant investor backing behind it, it is one worth watching. Questions about bitcoin? Speak to our bitcoin lawyers and call us on 1300 544 755.