Just when you were (maybe) beginning to get a basic understanding of the digital currency bitcoin, a second-place digital currency is gaining steam and growing in value. It’s called ether, it is the token of a blockchain network called Ethereum, and less than one year after launching, its market cap now exceeds $1 billion.
On Thursday, Ethereum hit another business milestone when Coinbase, the leading mainstream platform for buying and trading of bitcoin, added support for ether. Coinbase customers—there are 4 million of them in 32 countries—can now easily buy and trade ether using the Coinbase web site or mobile app.
But would they want to? First they’d have to understand it.
If bitcoin, which runs on a decentralized, permission-less, peer-to-peer blockchain, is still in its infancy—a point bitcoin believers love to make—then Ethereum is barely out of the womb. As the New York Times wrote in March, the network “is complicated enough that even people who know it well have trouble describing it in plain English.”
Ethereum’s creator is Vitalik Buterin, a 22-year-old Russian tech-wunderkind who began working on the concept at age 19. A presentation Buterin made at Ethereum’s developer conference last year listed use cases such as: issuing assets; crowdfunding; domain registration; title registration; gambling; prediction markets; and the Internet of Things, among others.
Ethereum is not without troubling security issues: Last month a decentralized network called The DAO, built on top of the Ethereum blockchain, was attacked, in a theft of $50 million worth of ether. After the attack, an SEC official expressed grave concern over the network’s security.
Still, many in the cryptocurrency world say Ethereum is even more exciting than bitcoin because of the ability to smore smart contracts on its network. Many developers are already running early-stage apps on top of Ethereum, for all manner of services including blockchain payments via Slack and placing bets on which tech startups will get popular first.
Coinbase had already added ether to its more formal cryptocurrency exchange site for institutional investors, GDAX, back in May. “We saw individual as well as developer interest in Ethereum rise at the end of 2015, and by the early part of 2016 our customers on GDAX were saying, ‘Give us the ability to sell ether,'” says Adam White, VP of business development and strategy for Coinbase. Bringing ether to its mainstream wallet product was the obvious next step.
Coinbase adding ether (everywhere but New York) also means that all partners using the Coinbase “buy widget” can do the same. One such partner is Lawnmower, a mobile app that originally launched as a “roundup” service that invests your spare change into bitcoin, using Coinbase.
Lawnmower recently changed its model to allow users to set an auto-purchase of bitcoin once a month at a set price, and it just updated its app this week to include a news hub for intel on many cryptocurrencies, including ether, litecoin, and ripple. In other words: Lawnmower, like Coinbase, saw ether pulling into second in the crypto race.
“Some of these assets recently, like ether, our users have made it clear they want to learn more about it,” says Alex Sunnarborg, Lawnmower CFO. “So we just said, ‘Let’s move as fast as we can on it.'” Lawnmower added an index that shows ether’s price over time, compares it against bitcoin, and even has the full original white paper on Ethereum. What it couldn’t add was the ability to actually buy ether. Now that Coinbase has implemented that, it can.
All of the momentum for ether reflects that bitcoin will not be the only digital currency of interest. It was the first to come along, in 2009, but there is room for more. And indeed, there were more—like dogecoin, litecoin (whose inventor now works for Coinbase), and ripple—but White says, “Nothing uniquely differentiated itself until Ethereum. While bitcoin is a fantastic global transaction network, we see Ethereum offering a worldwide computational network.”
Coinbase was the first bitcoin wallet to get mainstream recognition. It was also by far the best-funded bitcoin startup until the mysterious 21 Inc. raised $116 million in a single round last year. Adding Ethereum to Coinbase, White says, “required a fresh look at how we design the platform. We wanted to keep it super simple, easy to understand, so that people like my dad, when they hear about Ethereum in the paper, and he wants to buy $100, he can go to Coinbase and it’s still a very simple process.”
If the casual investor does want to dip a toe into ether, Coinbase now allows it through a bank account, credit or debit card. Ether currently trades at around $12.
Coinbase expects to see “a very significant amount of interest.”
Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite.