Ethereum announced the beginning of its 42-day presale for Ether, the crypto-units which will fuel its distributed application software platform. Ethereum will acquire the Ether through a premine. Due to the controversial nature of premines, Ethereum will likely face competition from forks once the project source code is released.
Ether, the Fuel of the Ethereum Project, Is Available for Pre-Order
Earlier today, Ethereum began its official 42-day Ether presale. The developers are selling the Ether through a fixed-price model. Initially, 1 bitcoin will purchase 2,000 ETH, but that number will linearly decline over the course of the presale to a final price of 1,337 ETH/1 BTC at the end of the sale. The Ether will not exist until the developers mine the Genesis block, which they anticipate happening in the winter of 2014-2015. After mining the Genesis block, they will send the IPO’d Ether to everyone who participated in the presale.
Ethereum is the much anticipated distributed application software platform co-founded by Peter Thiel Fellowship winner Vitalik Buterin. Ethereum’s goals are quite ambitious.
“Ethereum can be used to codify, decentralize, secure and trade just about anything: voting, domain names, financial exchanges, crowdfunding, company governance, contracts and agreements of most kind, intellectual property, and even smart property thanks to hardware integration.”
Since Ethereum is not strictly a cryptocurrency, Ether serves as the platform’s “fuel” rather than a monetary unit. Users must pay Ether to build or use applications built on the Ethereum platform. According to the developers, this prevents spam.
“Without the requirement of payment of ether for every computational step and storage operation within the system, infinite loops or excessive storage demands could bog down ethereum and effectively destroy it.”
Developers or users can pre-buy Ether now for convenience or to hedge against a future price increase. However, Ethereum does not want speculators buying Ether as an investment. The Terms and Conditions agreement buyers sign before they purchase Ether states that:
“Purchaser is not exchanging bitcoin (BTC) for ETH for the purpose of speculative investment.”
However, it is unclear how Ethereum would distinguish a speculator from a developer and whether they would actually pursue any action against someone buying Ether as an investment.
Ethereum Plans to Face Competition from “Alt-etherea”
Ethereum’s decision to premine Ether and distribute it via an IPO has been controversial within the cryptocurrency community. Disgruntled community members have discussed forking the Ethereum source code once it is released on GitHub and releasing a non-premined “alt-etherea” to compete with the official project. Vitalik Buterin acknowledged this possibility in an official Ethereum blog post.
However, premines have become commonplace for projects which require a full-time research and development staff to function properly, and it is unlikely that these alt-etherea will prove to be a serious threat to the Ethereum platform. Earlier this year, Kyle Torpey explained why the community should not oppose reasonable premines.
“I’m a strong believer in the old saying, “You get what you pay for”, and I think joining an Ethereum fork without a premine would basically be like paying less for anything else that you buy on a regular basis. When you reward the original creators or producers of a product or service to a lower degree, you’re going to notice a decline in quality.”
By conducting an IPO, Ethereum will have a monetary advantage over its anti-premine competition. Combined with Ethereum’s research and development advantage over the competition, it is unlikely they will face a serious challenge from Ethereum forks.
Though prospective Ether purchasers should not worry about the threat of alt-etherea, Ethereum faces significant competition from current and future next-generation cryptocurrency platforms such as Nxt, Counterparty, and Mastercoin. Nevertheless, the community has already begun pouring money into the Ether presale. Within two hours of the sale’s launch, buyers had purchased nearly 2.5 million units of Ether.