Russian President Vladimir Putin is excited about the potential of blockchain technology, as thanks to Moscow-born Vitalik Buterin, Russia is already a major innovator. 

The 23-year-old Buterin is the inventor of Ethereum, bitcoin’s main rival and the world’s second most popular cryptocurrency. To highlight the enthusiasm with which the Kremlin has welcomed this happy coincidence, Putin invited Buterin to this year’s St Petersburg International Economic Forum (SPIEF) where the president positively gushed over the coinmaker. 

“Ethereum is the potential tool to help Russia diversify its economy beyond oil and gas,” Putin said during a photo-op with the rather geeky looking software engineer. After meeting Buterin, Putin said that “the digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business models,” critical after Russia’s recession. 

Buterin was born in Kolomna in Moscow Oblast but moved to Canada with his parents when he was six, going on to study computer science for which he showed a particular talent. 

His father introduced him to bitcoins when he was 17 and the first money he ever earned was paid in bitcoins for an article he wrote about them. But his literary output quickly became more serious; he published a whitepaper in 2013 outlining his ideas for his own cryptocurrency, Ethereum. 

He started working on the idea full time after dropping out of university thanks to a Thiel Fellowship grant of $100,000 that is awarded to gifted people under the age of 23 to allow them to pursue a scientific project, social movement or found a start-up. 

Ethereum is described as a “decentralised mining network and software development platform rolled into one” that facilitates the creation of new cryptocurrencies and programmes that share a single blockchain. The big difference with bitcoin is the “software development platform” part of the offering. While bitcoin is just virtual money, Ethereum is money that can have software attached to it and do things. 

Ethereum has already been adopted by Brickblock, a German real estate backed token, thanks to the addition of smart contracts to a coin that means any sort of trading can be done with this blockchain technology. At the very core of the innovation is the fact that the transactions, contracts and records that run on a blockchain have no central authority or administrator and so are immutable. You can’t hack the blockchain. 

Moreover, the apps that can be attached to Ethereum means it is possible to make “coloured coins”, specific subcategories of coins that are backed by things like Brickblock’s buildings or gold deposited in a bank. 

This idea could potentially have a huge impact on e-commerce as it would allow companies like Amazon to issue their own coloured currency that can only be used in their ecosystem, rewarding their customers with discounts if they use Amazon money instead of “real” money. And the applications for securities trading are endless. Ethereum could become a whole securities derivatives business in its own right. Having said all that, the first big-money application of Ethereum will probably be in online gambling. 

Ethereum raised $18mn during its ICO (Initial Coin Offering) and trading in Ethereum only really took off in January 2017. At the time of writing its currency was worth about $300 per coin — some 20 times more than this time last year. 

It’s still early days in the cryptocurrency world and it is not clear which currency will win out to become the money of choice. All in all nearly $250mn has been put into ICOs across the world, according to Smith+Crown, a cryptocurrency research firm, almost half of which ($107mn) was raised in 2017.