It is essential to understand what Ethereum’s main elements are and what’s the difference between Ethereum and the others, to understand Ethereum in its entirety, how it can potentially impact our society and what it is its purpose.
Let’s begin with the fact that Ethereum is Decentralized and it means that not any single governing entity can control it . On a centralized system of governance, Most enterprises, businesses and online services are built. Being a decentralized system, Ethereum is not controlled by anyone at all and is fully autonomous. With their computers around the globe, it is being run by thousands of volunteers.
Secondly, on Bitcoin and Ethereum beingis the same thing, many people confuse. However, they are very different with very different goals, with the foundation of it being blockchain technology and fully supported by it, bitcoin was the first everfirst-ever cryptocurrency out there.
Ethereum substantially took this technology and expanded its capabilities. With its coding language, payment system, and Internet browser, Ethereum is a whole network. And above all, users are allowed to create decentralized applications on Ethereum’s Blockchain.
By a global system of so-called ‘nodes’, the entire Ethereum system is supported. Nodes are volunteers, keeping the network honest and receiving rewards in return, who download the entire Ethereum’s Blockchain to their desktops and fully enforce all the consensus rules of the system.
Moreover, the Ethereum Virtual Machine (EVM), which essentially serves as a runtime environment for smart contracts based on Ethereum is also provided to its users. While ensuring that the programs don’t interfere with each other, it provides users with security to execute an untrusted code. EVM is made a perfect sandbox-tool for testing and improving smart contracts as it is completely isolated from the main Ethereum network.
Who created Ethereum
in a white paper, which Vitalik Buterin sent out to a few of his friends, who in turn sent it out further, he explained his idea In late 2013. About 30 people reached out to Vitalik to discuss the concept as a result. He was waiting for people to point out critical mistakes in the concept and for critical reviews and , but it never happened.
With the core team consisting of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, Charles Hoskinson, Joe Lubin and Gavin Wood, the project was publicly announced in January 2014. At a Bitcoin conference in Miami, Buterin also presented Ethereum on stage, and just a few months later the team decided to hold a crowdsalecrowd sale of Ether, the native token of the network, to fund the development.
Is Ethereum a cryptocurrency?
Ethereum is a software platform that aims to act as a decentralized app store as well as a decentralized Internet and it is much more than just “money,” . And of course, for all the resources required to run a program or an application, a system like this would need currency. And this is what “Ether” is for.
Moving forward, to process the payment, Ether is a digital asset which does not need a third party. Moreover, it is also required for the apps within the Ethereum network and it is not only digital currency. An amount must be paid for the transaction fees in order for the system to process the change, When anyone wants to change anything within the apps.
Is ethereum similar to Bitcoin?
Well, sort of, but not really.
Ethereum is a distributed public blockchain network like Bitcoin. The most important distinction to note is that Bitcoin and Ethereum differ substantially in purpose and capability, even if there are some significant technical differences between the two. , a peer to peer electronic cash system that enables online Bitcoin payments, that is OneBitcoin offers one particular application of blockchain technology is offered by Bitcoin. REthereum focuses on running the programming code of any decentralized application, while Bitcoin is used to track ownership of digital currency (bitcoins).
Miners work to earn Ether, a type of crypto token that fuels the network, in Ethereum, instead of mining for bitcoin. Ether is also used by application developers to pay for transaction fees and services on the ethereum network, beyond a tradeable cryptocurrency.
There is a second type of token called gas that is used to pay miners fees for including transactions in their block. To be sent along with it to entice miners to put it in the block chainblockchain, every smart contract execution requires a certain amount of gas.
Is Ethereum better than Bitcoin?
Beyond Bitcoin & first-generation decentralized applications. Blockchain technology has many other applications that go way beyond digital currencies even if it is commonly associated with Bitcoin. In fact, only one of several hundred applications that use blockchain technology today is Bitcoin.
Until relatively recently, a complex background in coding, mathematics, cryptography as well as significant resources was required by building blockchain applications. But times have changed.
Previously unimagined applications, from digitally recorded property assets & electronic voting to trading & regulatory compliance, are now actively being developed and deployed faster than ever before. Ethereum is making all of this possible, by providing developers with the tools to build decentralized applications.
How Ethereum works
As it was mentioned before, Ethereum’s Blockchain design is tweaked, so that applications beyond money systems can be supported. Ethereum’s Blockchain does a lot more than that and the two Blockchains’ only similarity is that they store entire transaction histories of their respective networks. Besides the history of transactions, every node on Ethereum network also needs to download the most recent state, or the current information, of every smart contract within the network, all the smart contract code and where it’s stored and every user’s balance.
The Ethereum Blockchain can be described as a transaction-based state machine essentially. A state machine is something capable of reading a series of inputs and transitioning to a new state based on those inputs, when defined according to computer science. The machine transitions into another state, when the transactions are executed.
Millions of transactions exist in Every state of Ethereum. With each and every block beingis chained together with its previous blocks, those transactions are grouped to form ‘blocks,’. But it needs to be validated, that goes through a process called mining, before the transaction can be added to the ledger.
Mining is a process when a group of nodes apply their computing power to completingcomplete a ‘proof of work’ challenge, which is essentially a mathematical puzzle. The more powerful their computer is, the quicker it can solve the puzzle. An answer to this puzzle is in itself a proof of work, and it guarantees the validity of a block.
In an attempt to create and validate a block, a lot of miners around the world are competing with each other, as every time a miner proves a block new Ether tokens are generated and awarded to said miner. As they not only confirm and validate transactions and any other operations within the network but also generate new tokens of the network’s currency, miners are a backbone of the Ethereum network.
Advantages of Ethereum
From all the properties of the Blockchain technology that it runs on, the Ethereum platform earns benefits. All the decentralized apps and DAOs deployed within the network can’t be controlled by anyone at all, which means It is completely immune to any third party interventions.
Every Blockchain network is formed around a principle of consensus, which means that every node within the system needs to agree on every change made within it. This makes the network tamper-proof and eliminates possibilities of fraud, corruption.
There is no possible single point of failure as the whole platform is decentralized. Hence, all the apps will never switch off and always stay online. Moreover, against possible hacking attacks and fraudulent activities, the decentralized nature and cryptographic security make the Ethereum network well protected.
Disadvantages of Ethereum
They can only be as good as the people writing the code for them, Despite the fact that smart contracts are meant to make the network fault-proof. Any mistake in the code might get exploited and there is always room for human error. There is no direct way to stop a hacker attack or an exploitation of said mistake, if that happens. Reaching a consensus and rewriting an underlying code would only be a possible way of doing so. However, as it is supposed to be an unchangeable and immutable ledger, this goes completely against the very essence of the Blockchain.
More than 3.6 mln Ether tokens were stolen from ‘The DAO,’ which is the name of a particular DAO launched on April 30, 2016, when it attacked. Essentially just draining the funds from DAO into a ‘child DAO,’ that had the same structure as The DAO, the attacker exploited a ‘recursive call bug’ in the code. As it basically undermined the users’ trust in the whole Ethereum network, with Ether’s value falling from over $20 to under $13, the loss of a massive chunk of The DAO’s funding wasn’t the only consequence of the attack.
What apps were developed on Ethereum?
Ethereum has a capacity of opening up the world of decentralized apps even for people who do not have any technical background. It can become a revolutionary leap for Blockchain technology that will bring it closer to mass-adoption, If this happens. Currently, through its native Mist browser, which provides a user-friendly interface as well as a digital wallet for storing and trading Ether, the network can be easily accessed.
Most importantly, users can manage, write, and deploy smart contracts. Through a MetaMask extension for Google Chrome and FirefoxEthereum network can be accessed alternatively.
Depending on centralized control, such as insurance, finance, real estate and so on, the Ethereum platform has the potential of profoundly disrupting hundreds of industries that currently. Currently, for a broad range of services and industries, the platform is being used to create decentralized apps . Below is a list of some of the most noticeable ones.
- Gnosis — A decentralized prediction market that allows users to vote on anything from election results to the weather.
- EtherTweet — providing users with a completely uncensored communication platform, this application takes its functionality from Twitter.
- Etheria — It exists entirely on the Ethereum Blockchain, even if it feels and looks very much like Minecraft.
- Weifund — An open platform for crowdfunding campaigns that implements smart contracts.
- Uport — Provides users with a self-sovereign ID that enables them to log-in without passwords, collect verifications, digitally sign transactions and interact with Ethereum apps.
- Provenance — For consumers to make informed decisions on their purchases, the project aims to create an open and accessible framework of information. This is executed throughby tracing the origins and histories of products.
- Augur — An open-source forecast and prediction market that rewards correct predictions.
- Alice — A platform that aims to bring transparency to charity and social funding through Blockchainblockchain technology.
- Bitnation — The World’s First Virtual Nation, a Blockchain jurisdiction. It contains many of the same functions as a traditional nation, such as education, ID cards, insurance, diplomacy programmes, including ones for ambassadors and for refugees and many many more.
- Ethlance — A freelance platform to exchange work for Ether rather than any other currencies.
How to get Ether
Buying and mining are the two primary ways of obtaining Ether. Buying it on exchanges, is the most common and perhaps the most convenient way of buying Ether. All you need to perform is discover an exchange that trades in Ether and operates within your jurisdiction, set up an account and use either your bank account, wire transfer or in some cases even your bank card to buy Ether tokens. Ether tokens should be stored in a wallet, which can be given by an exchange itself, Ethereum’s native Mist browser or by various other specialized services.
Alternatively, Ether can be obtained throughby paying for it with any agreed uponagreed-upon currency, including Bitcoin and other cryptocurrencies and peer-to-peer trading . This can be done both online and in-person. Among Bitcoin users, Peer-to-peer trading is rather popular . However, Ether is usually obtained via exchanges due to the virtually unlimited supply of Ether tokens and the Ethereum platform not putting complete user anonymity at the forefront of the system.
Mining is another way of getting Ether tokens. Mining Ethereum uses proof-of-work, which means that to solve a complex mathematical problem in order to ‘seal-off’ and confirm a block of actions within the network, miners contribute their computing power. RewardA reward is received by Miners for every block mined, who manage to successfully complete this task .
Future of Ethereum
Despite the fact that much like Bitcoin, Ethereum has been around for several years. It only just started gaining the general public’s attention and mainstream media’s. A lot of experts agree that it revolutionizes services and industries that have been existing for hundreds of years and not only is a disruptive technology that is set to not only completely change the way the Internet works.
The creator of Ethereum, Vitalik Buterin is being very carefulconscientious and modest with his predictions. He stated that he intends to keep Ethereum the leading Blockchain-related platform, focusing on technical issues and security improvement in the new future, in a recent interview.