What is ETHEREUM?
Ethereum is the extended version of Bitcoin; this is so because ethereum works on the technology used in bitcoin; exploring and advancing its capabilities. The best thing about ethereum is that it is the all-in-one package. It has its network, internet browser, coding language payment systems etc. It provides users with liberty to develop their decentralized applications on ethereum’s blockchain.
The application is developed on the ethereum platform can be based on the entirely new ideas or the decentralized reworks of already existing concepts. This cuts the middleman out and all the expenses being associated with the third party. For example:- If one like any post of his favourite artists on Facebook, the earnings related to that goes to the facebook directly. But, in the case of ethereum, both the artist and the audience will receive awards for the positive communication and support. Likewise, in a decentralized kickstarter, one won’t only get some reward but will also be receiving the part of the company’s future profits.
So one can quote ethereum as a public open-source, Blockchain-based distributed software platform which allows developers to build and deploy decentralised applications.
As it is mentioned that Ethereum is a decentralised system which utilizes P2P approach. So, every single transaction is supported only by the ones taking part in it, without any controlling authority involved.
The Ethereum system is established with the help of a global system called ‘nodes’. Nodes act as volunteers which download the entire Ethereum’s Blockchain to their desktops and enforce the consensus rules of the system.
The consensus rules, as well as various aspects of the network, are governed by ‘smart contracts’, which are designed to perform transactions and other actions within the network with parties that one doesn’t trust. The terms for both the involved parties are being pre-programmed in that contract. The fulfilment of these terms leads to the successful transaction or action. According to believers, smart contracts are the future and will replace the traditional contracts as they provide security that is much superior to traditional contract law. Also, it reduces the transaction costs involved with contracting and establishing trust between the two parties.
The ethereum system also provides their users with the Ethereum Virtual Machines(EVM), which serves the purpose of the runtime environment for smart contracts based on Ethereum. Also, it provides users with security to run the untrusted code while ensuring that these programs don’t conflict with each other. EVM is isolated from the main ethereum network, which makes it a sandbox-tool for testing and improving smart contracts.
The platform provides a cryptocurrency token known as “Ether”.
Inventor Of Ethereum:
In the end of 2013, Vitalik Buterin proposed his idea on a white paper and circulated it to few of his friends, who further circulated it. Due to this circulation process, approx 30 people approached Vitalik to discuss the concept. He was expecting for the critical reviews from the readers of his paper, which never happened.
The project was made open to the public in January 2014, with the core team which includes Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, Charles Hoskinson, Joe Lubin and Gavin Wood. Buterin presented Ethereum on stage at Bitcoin conference, held in Miami. After a few months of this event, the team held a crowdsale of Ether, to fund the development.
Is Ethereum A Cryptocurrency?
According to a definition, it is a software platform presents itself as a decentralised Internet and app store. The system needs currency to pay for computational resources which are required to run an application or a program. Here, comes the part of Ether to play.
Ether is a digital asset which doesn’t require a third party to process the payment. It doesn’t only act as digital currency but also works as a ‘fuel’ for the decentralised apps within the network. If user wants to make any changes in already existing apps in ethereum, they have to pay the charges so that they can make changes.
The transaction fees are automatically decided according to the amount of change one wants to make.
Is Ethereum Similar To Bitcoin:
Ethereum is quite similar to bitcoin if it is seen in the context of cryptocurrency. But if we go a bit deeper into the subject, then these two are completely different projects with different aims. Bitcoin has made its place as a most stable and successful cryptocurrency till date, while Ethereum is a platform that serves various purposes with its digital currency known as ‘Ether’ which is just a simple component to its smart contract applications.
If one goes concerning the cryptocurrency, these two projects are slightly different. For example, Bitcoin has a capital of 21 mln, which can ever be created, while the potential supply of Ether can be endless. Further, Bitcoin takes 10 minutes in mining on an average, while for ether its just 12 seconds, which is much quicker than Bitcoin’s mining time.
One significant difference is that for successful mining of bitcoin it requires computing -power and electricity on large scale which is possible only if one uses industrial -level mining farms. While, on the other side, Ethereum’s proof-of-work encourages decentralised mining by individuals.
There is also one major difference which is Ethereum’s internal Turing is complete, which means that everything can be calculated as long as there are enough computing power and time to do so. But, in the case of Bitcoin, nothing is like that. The Turing complete code provides users of ethereum with practically limitless possibilities.
Working of Ethereum :
As it has been already discussed above that ethereum is being developed using Bitcoin’s protocol and its blockchain model, but is modified so that processes beyond money systems can also be supported. So, the two blockchains’ only one similarity and, i.e. both store the whole transaction of their respective networks, but ethereum’s Blockchain does much more than recording transaction. Besides, recording transaction, ethereum network also downloads the state, of each smart contract within network, every user’s balance and all the smart contract code and where it’s stored.
Substantially, Ethereum blockchain can be defined as a transaction-based state machine. Regarding computer science, a state machine is defined as the machine which is capable of reading the series of inputs and transition them into new states based on the inputs. When the transactions are terminated the machine transitions into new sate.
In every state, Ethereum consists of millions of transactions which are further grouped to form the ‘blocks’. The blocks are being chained together with the previous blocks. Before, adding it to the ledger, the blocks are needed to validated through a process called mining.
Mining is the process where groups of nodes apply their computing power in executing ‘proof-of-work’ challenge, which is a mathematical puzzle. The more powerful their computers, faster they can serve to solve the puzzle. The answer to this puzzle will guarantee the validity of a block.
Miners are a backbone of the Ethereum network, as they not only validate or confirm the transactions within any networks but also generate new tokens of the network’s currency.
Purposes For Which Ethereum can be Used:
The developers can build and deploy decentralised applications. Furthermore, any centralized service can be decentralised by using Ethereum’s platform. The potential of Ethereum platform for building apps not limited by anything other than the creators’ creativity.
The applications being developed on Ethereum’s platform have potential in modifying the relationship between the companies and its service holder’s completely. These days there are lot of companies which charges extra or as commission for the services provided by them. On the contrary part, there is no such commission/extra charges linked or imposed on Ethereum’s Blockchain, plus the implementation of smart contracts ensures the safe and fast trading for both parties involved without the involvement of any intermediary.
The Blockchain technology is self-sufficient in revolutionizing the web-based services as well as industries involving long-established contractual practices. Most important, the Ethereum Blockchain is capable of bringing its core ideas -transparency, security, trust and efficiency- into any business or industry.
Ethereum can help to create Decentralised Autonomous Organizations (DAO), which operate independently and transparently, with no single leader. DAO’s are made by programming code in collaboration with smart contracts written on Blockchain. It is purposefully designed to eliminate the need for a particular person or group of people.
DAO’s are being owned by the people who purchased the tokens. Tokens doesn’t give people with any share or equity ownership instead; it provides people with voting rights.
Advantages Of Ethereum:
Ethereum provides every benefit provided by the blockchain technology and also completely immunes the interventions of any third party, which means that DAO’s are deployed within network that can’t be controlled by anyone at all.
Any network made is based on the consensus protocol, means that to make a change in the system everyone or say ‘nodes’ have to agree for the change to be accomplished, which eliminates the possibility of any fraud or corruption leading the network to be tamper-proof.
The whole system is decentralised, which means there is no single point of failure which means all the apps will always stay online and never switch off. Further, the decentralized nature and cryptographic security make the Ethereum network well protected against possible hacking attacks and fraudulent activities.
Disadvantages Of Ethereum:
Despite a lot of promises or commitments made by ethereum, it’s still prone to fault as everything depends on how efficient the code is. There is always a chance for human error, and any error can be get exploited. If that happens, there is no way to stop it, other then reach to the consensus and rewriting the underlying code. However, this conflicts with the basic idea of blockchain which says ledger is immutable and unchangeable.
Apps Developed Using Ethereum?
Below is the list of some decentralised apps already developed using the concept of ethereum:
Gnosis: Provides a prediction market which allows users to vote on anything from election results to weather.
EtherTweet: takes functionality from Twitter, which provides users with the liberation of uncensored communication.
Augur: An open-source prediction and forecast market that rewards correct predictions.
Alice: Brings transparency to social funding and charity through blockchain technology.
Ethlance: A freelance platform at which people exchange their work for ether rather than any other currencies.
There are many more such decentralised applications, which can be found on the State of dApps website.
Future Of Ethereum:
Although Ethereum is similar to Bitcoin, it has been around for several years but just only started gaining public and media’s attention. According to many experts, due to it distributive property, it is going to not only completely change the way Internet works but also revolutionize the services and industries that have been existed for hundreds of years.
In a recent interview, Vitalik Buterin stated that he intends to keep Ethereum the leading Blockchain-related platform, focusing on technical issues and security improvement in the new future.
Balaji Srinivasan, CEO of 21.co has asked his firm to belief on the Ethereum platform still being around in 5-10 years time. Peter Smith, founder of Blockchain, defined Ethereum’s infrastructure applications as ‘fascinating’.
Overall, views on the future of Ethereum among cryptocurrency experts are in favour. However, there are numerous old-school financial experts who, regardless of the extraordinary success and relative security of both Bitcoin and Ether, as well as the undeniable importance of technologies behind the projects, are still predicting their impending downfall.