The term 'Ethereum Currency (Ether)' is included in the Banking edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Choose your edition here...
Ethereum Currency, often simply called Ether tokens, proves to be the much-needed fuel element for the Ethereum operating platform and system. As such, Ether is also a type of payment that platform clients can make to the machines which execute the smart contracts, or operations auto requested between two parties. Ether is simultaneously the financial incentive to make certain that the developers create high-quality applications so that the network stays healthy. Individuals must be compensated for contributing resources to the platform and network. It ensures both efficient programming and quality final products created using the Ethereum block chain, since wasteful code is more expensive to deploy.
Ether is the principal crypto currency rival to industry titan Bitcoin. Unlike Bitcoin though, whose maximum issue is a total of 18 million BTC, Ether does not have such a limited total issue. The parties who signed on to the 2014 presale terms of Ethereum currency dictated that the ether token issue would be limited to a strict 18 million tokens each year. Issuance may be strictly fixed, but total supply increases substantially every annum. The idea is that eventually there will be so many Ether tokens that the amount lost every year will merely be replaced by the new up to 18 million issued tokens. In other words, at some point in the foreseeable future, an equilibrium in total numbers of Ether in existence would be reached finally.
The creators of Ethereum currency do not see themselves as a young upstart rival to big brother crypto currency Bitcoin. In fact, they give credit to bitcoin for developing both the block chain technology and the idea for a virtual currency in the first place. The founders of Ether regard themselves as a complementary force in the so-called digital ecosystem. To them, such Ether tokens are merely crypto-fuel which can be employed to compensate for computation. They did not intend it to become a transactional currency, share, asset, or any other element.
To prove this point, the Ether system creators tout the many different means of utilizing Bitcoins in the Ethereum ecosystem. It can be traded literally for ETH tokens. There are a number of different third party firms whose goal and efforts are to see the seamless exchange of Bitcoins for Ether tokens become a reality as soon as can be.
This would allow for holders of BTC to be able to execute smart contracts with Ether tokens. They could then immediately transfer back to BTC to ensure that their currency remained within the Bitcoin network and stayed valued in BTC. Latest versions of the physical wallets come with auto converters from BTC to ETH tokens.
Ethereum currency is similarly an ideal means of performing complicated trading within multiple groups. Once all participating parties obtain a Bitcoin price source in common, it is easy for them to develop a currency based on ethereum. The value in this case could be simply and effectively pegged to the Bitcoin market value. It would allow for individuals to trade back and forth between BTC and ETH tokens with a guarantee they would be able to receive back their original quantity of Bitcoins all the while they were completely compatible with the smart contracts pioneered and championed by Ethereum.
Finally, Bitcoins may be relayed in order to create a convertible two way peg. Using the Bitcoin relay, one may easily side chain from one Bitcoin into ether tokens. It allows for people to hardwire a Bitcoin into a smart contract which is literally tied to an associated ethereum contract. Such an ethereum token could then be issued which was backed by the hardwired Bitcoin in the smart contract itself.