What is Ethereum?
Beyond a Crypto
Unlike Bitcoin, Ethereum is not only merely a cryptocurrency, it’s actually a platform developed basing on blockchain technology that enables decentralized applications to be deployed on such like smart contract or financial applications.
On Ethereum, you can write code that controls money, and build applications accessible anywhere in the world.
The first whitepaper was released in 2013, Ethereum is the brainchild of the Vitalik Buterin, who saw the potential uses of Bitcoin’s underlying blockchain technology as the next steps in furthering the expansion of the blockchain community.
Ethereum is now currently the cryptocurrency with the second highest coin market cap and is expected by some to bypass Bitcoin as both a valued investment and as the world’s most popular cryptocurrency.
- November 2013: Vitalik Buterin publishes the Ethereum whitepaper.
- January 2014: The development of the Ethereum platform was publicly announced. Ethereum called for ICO and raises $18.4 million.
- July 2015: “Frontier” , the first stage of Ethereum’s development was released.
- March 2016: “Homestead”, the first stable Ethereum release, went out on block 1,150,000.
- June 2016: The DAO hack happens and the $50 million worth of Ether, which was 15% of the total Ether in circulation back at the time.
- October 2016: Ethereum Classic forks away from the original Ethereum protocol.
- October 2017: The Metropolis Byzantium hard fork update took place.
- February 2019: The Metropolis Constantinople hard fork update took place.
Ethereum Blockchain and Smart Contracts
Smart contracts are the primary feature of Ethereum and are basically self-executing programs that facilitate the exchange of anything of value on the network. They execute when specific conditions are met without any interference of third parties and have no downtime, as long as the Ethereum network is functioning.
When running on the blockchain a smart contract becomes like a self-operating computer program that automatically executes when triggeredby someconditions. Because smart contracts run on the blockchain, they run exactly as programmed without any possibility of censorship, downtime, fraud or third-party influences.
Unlike all blockchainsthathave limitedability to process operations, Ethereum allows developers to create any operations they want. They can build alot of different applications that go far beyond thingswe have experienced.
Described in Ethereum whitepaper, Vitalik Buterin found that a transaction in itself is secured with a contract. As the consequence,he developed the Ethereum Virtual Machine which is the environment for Dapps execution; that any transaction over the blockchain network should be self-executed once agreed upon by both parties and should be recorded on a public blockchain ledger. This self-execution is what makes these contracts “smart”.
For detail of smart contract, see the What is smart contract article on AZCoin News.
Ethereum vs Ether
The Ethereum blockchain functions similarly to the Bitcoin blockchain: a network of computers run software that validates transactions through majority consensus called mining. Mining is powered by people running these computers who validate the transactions.
Within the Ethereum platform, is a cryptocurrency called Ether that is used to power applications built on the Ethereum blockchain.
Bitcoin miners are compensated for their resources by being paid in Bitcoin.
Ethereum miners are compensated in Ether.
If you want to run your car you need to put it fuel or petrol. The same thing when you need Ether to run applications on the Ethereum blockchain. This Ether is what powers the smart contracts as well as running DApps, generating tokens during ICOs, facilitating transactions on the Ethereum blockchain, and making payments. That’s why Ethereum (or Ether) is also called programmable money.
The environment for DApps
Ethereum platform is really a fantastic environment for Distributed Applications (DApps) to run on. Any kind of application or transaction, such as the emails you send your colleagues, the money that you donate to charity, or the rent you pay for your home,… all can make use of smart contracts. The result is the potential to create a vast array of decentralized applications all on a single platform.
Ethereum mining is similar to Bitcoin mining in many ways. However, the main difference where the Ethereum blockchain not only stores the transaction list of the blockchain, but also the most recent state of the network.
Ethereum also employs the use of Patricia Trees rather than Merkle Trees as part of its blockchain state regulation. Patricia Trees are a modified form of Merkle Trees that enables Ethereum to efficiently store and adjust the state of the blockchain in each block.
Some features of the Ethereum blockchain and mining are:
- 12 second block time
- Ethash Mining Algorithm (Uses DAG)
- Static Block Reward of 3 ETH
- Miners compensated for gas expended in block.
- Extra reward for including Uncles as blocks.
Benefits of Ethereum
The benefits of Ethereum not only as a blockchain-based platform itself but also compared to other blockchain-based platforms includes:
- Immutability – A third party cannot make any changes to data.
- Corruption/Tamper Proof – Censorship is unfeasible with the PoW consensus of the vast and decentralized network agreeing on its global state.
- Security – The combination of the PoW consensus, cryptographic techniques used in the transaction model, and lack of a central point of failure protects the network against hacking and manipulation.
- No Downtime – Applications, smart contracts, organizations, etc all running on the Ethereum blockchain are always running and cannot be turned off.
Ethereum is one of the most important and popular platforms in the blockchain and cryptocurrency industry today. As tech talent continues to migrate to the space, adoption becomes more widely, and scaling solutions are implemented, Ethereum remains the distributed world computers for the decentralized applications.
With many of the innovative features such like Ethereum Virtual Machine, Ethereum smart contracts, Ethereum gas, Ethereum has created a significant impact on further developments in blockchain technology.
Smart contracts have entered a new wave of technology consulting services. Companies that can implement transactions as smart contracts have been contracted as consultancies by numerous organizations that wish to decentralize their network transactions. Smart contracts have been the biggest takeaway from the crypto explosion in 2017. Many organizations now have Blockchain departments in order to monitor and expand on cryptocurrency research and technology.
Ethereum, alongside Bitcoin, seem to be the center of the cryptocurrency world. With standards being proposed and implemented on the Ethereum network, a huge and dedicated community of developers and various other contributors behind it, and a talented leader in Vitalik Buterin leading the way, the Ethereum future looks brilliant.