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Ethereum: Your Guide to valuable insights!
What is Ethereum?
2017 was the year when cryptocurrencies were unstoppable. Created by Vitalik Buterin in the fiscal year 2013, Ethereum crypto was developed and launched to execute things which Bitcoin isn't capable of doing. Today, if we talk about the aggregate value of all the cryptocurrencies, it stands at a whopping $594 billion USD. With a jump of more than 3,200% in returns, an array of cryptocurrencies has left even the top-notch performing stocks in the dust. Ethereum is breaking the stereotypes in digital currency domain by becoming one of the most promising cryptocurrencies in the world.
Going with the official Ethereum project website, Ethereum can be classified as a decentralized platform for an array of applications which can be run and programmed without any interference, censorship or even fraud. What comes as a fascinating fact is that, the code which is being written in the virtual currency-Ethereum blockchain, it can't be tempered, altered and even hacked. This tamper-proof property of Ethereum makes it a safe bet when it comes to blockchain technology.
The story begins in 2011, when a Russian-Canadian teenager learns what Bitcoin is. The boy’s name is Vitalik Buterin. Later he contacts developer enthusiasts across different continents and in 2013 publishes a paper on the new crypto-concept: Ethereum.
A year goes by, while Vitalik is awarded a $100 000 Thiel Fellowship grant and abandons the University of Waterloo to dedicate himself to working on Ethereum, which finally takes off in 2015. By 2017 the market capitalization of the system reaches $36 000 000 000, which is equally astounding from the investor’s, tech specialist’s or historian’s point of view.
While the ultimate goal of Bitcoin founders was to create a decentralized currency, the Ethereum creators pursued a wider range of goals, which they achieved by means of combining the Ethereum-specific blockchain technology and a Turing-complete programming language, constructed specifically for that purpose.
Buterin’s paper gives a detailed description for a variety of use cases for DAPPs using the Ethereum blockchain. Those include such areas as file storage systems, banking, insurance, cloud computing, prediction markets, identity and reputation management systems, token systems and many more.
Ethereum & Ether
When we talk about Ether, it's Ethereum's cryptocurrency blockchain asset. Ether is used to run the entire Ethereum network. Thus, we can say, Ethereum is not just a blockchain, but it is a blockchain based software platform. The other name for Ethereum is «Programmable Money». If you dig deeper into the Ethereum history, you'd be amazed to know that the same was not created to serve as another random cryptocurrency, but it was a dedicated effort to code, run and finally execute smart contracts around the world. A DAPP(Distributed Application) can function independently without any sort of human touch.
Today, Ethereum is the second largest cryptocurrency in the market with a cap value of over $69 billion USD. Although, Ethereum is getting widely used as a cryptocurrency as it shares its basic traits as bitcoins. Ether is a revolutionary tethered token offering from Ethereum. What real investors can purchase and trade is the Ether tokens. Providing over 8,900% returns, Ether is sweeping the market with its blooming performance.
ERC20 Standard & Tokens
You might have heard the word ERC20 Token recently when ICO funded blockchain start-ups are thriving the market. Well, ERC simply means Ethereum Requests for Comments. When it comes to proposing advancements or improvements to Ethereum Network, the same is an official protocol. The proposal ID number of ERC stands at 20. Therefore, we can say that ERC20 defines and offers an array of rules which are required to be met for the purpose of an ordinary Ether token to be accepted and further be called as ERC20.
The Difference between Bitcoin and Ethereum
Inherently, the same principles lie at the core of both Ethereum and Bitcoin. Bitcoin, which appeared in 2009 and has been to this day the biggest cryptocurrency, is based on the blockchain technology, as well as Ethereum. The blockchain allows for secure transactions without any institutional mediators, and a decentralized universal currency is thus created.
The blockchain constantly manages Bitcoin transactions, carrying out the functions of a ledger, tracking and certifying these transactions. There is no single entity maintaining the blockchain, instead it is run by a global network of separate nodes. This approach ensures the integrity of the blockchain. The network is updated with new blocks only after those have been validated. Ethereum is similarly run by separate miners. The latter manage earn their share of cryptocurrency, be it bitcoin or ether, by managing transactions.
Having said that, it does not seem possible to omit significant differences between the two. A peer to peer system, that Bitcoin is, concentrates on who the electronic currency belongs to, effectively applying the blockchain to this problem. Ethereum’s focus is the application code itself. This helps developers carry out their transaction payments and service fees on the network.
One of the people behind Ethereum, Dr. Gavin Wood, commented on the difference between the currencies, stating that Bitcoin represents only one way to apply the blockchain, like e-mail is only one of the possibilities opened by the Internet. Wood’s point is that Ethereum utilizes the technology to achieve a very different goal.
Ethereum: A Virtual Machine
When there wasn't Ethereum in the crypto market, applications could be only designed to execute a handful of operations. For example, Bitcoins were just limited to P2P digital currency exchange. A majority of developers around the world faced the problem. EVM i.e. Ether Virtual machine is that revolutionary innovation which allowed anybody to run any program on the Ethereum network. Irrespective of the programming language choice, developers were provided with ample time and memory. The process of creating blockchain applications was simplified to a greater extent after the introduction of EVM. Hence, Ethereum has opened the world of cryptos to thousands of different applications & that too under the same hood.
What is a Smart Contract
In simpler words, Smart Contract is a computer code that encompasses a potential to facilitate the exchange of shares, property, money, content or basically anything of some value. Smart Contract becomes a self-operating computer program when it's running on a blockchain. It automatically interprets, records and executes as soon as a certain set of conditions are met. As explained above, smart contacts work on the principle of no third-party interference or censorship, therefore it's utterly secured.
As it has been said before, a smart contract is a piece of code that is run if certain conditions are satisfied. For further effectiveness and fairness the contracts are self-managed and do not require a single managing unit, pretty much like other blockchain-based components.
Here is a very simple situation that can be represented by such a contract (most contracts are of much greater complexity):
1. There are two agents, Jim and Sarah
2. Those two hold a bet on whether the price of ether reaches $1000 by September, 2018
3. If the condition above is met, Sarah has to pay Jim 100 ETH and vice versa
4. Both sides give 100 ETH to the prize fund that the winner later takes
5. On the designated date the information on the ETH value is extracted from a predefined data source
6. According to the value the smart contract automatically initiates sending 200 ETH to the winner
7. Jim and Sarah may not even know each other, but the deal is secured because of the trusted data source
To summarize, a smart contract automatically executes different tasks according to the predefined set of instructions in it.
Uses of Ethereum
When it comes to building and further deploying decentralized applications, Ethereum can be any developer's out of the box pick. DApp or decentralized application serve a specific purpose to its user. DAO i.e. Decentralized Autonomous Organizations can be build by making use of Ethereum. DAO offers an absolute autonomous appeal with no single leader or manager. When programming code is executed associated with several smart contacts, DAO happens. Anybody who has purchased the Ether tokens owns the DAO. Token here doesn't mean the equity shares or ownership, they simply refer to giving people their voting rights.
Benefits that come handy with Ethereum:
1. Security: Security analysis goes hand in hand when we talk about Ethereum. With no central point of failure, Dapps are well protected and are not prone to any fraudulent activity.
2. ZERO Downtime: Apps made and associated with DAO and Ether never go down and can never be turned off, therefore, zero downtime can be achieved with added ease.
3. Corruption proof: Since there are consensus and absolute transparency with a public ledger, there isn't any scope for corruption happening in the network. Plus, nobody actually controls the giant crypto mesh.
Ethereum is not just any random cryptocurrency that is meant to be traded. Its purpose rests on the real values, several thousand nodes are powering the word of a distributed computer which as a whole is backed by Ethereum. ETH or Ether is the cryptocurrency which gets traded. Since Ethereum is an open source crypto network, developers from all over the world can work on the network and build ravishing applications. Every inch of the platform if public, Ethereum is decentralized and distributed.