Ethereum

This Ethereum guide will help to answer the question what is Ethereum and how can you use it, without getting so deep into the technical aspects that you might get lost.

Ethereum Guide Basics: What is Ethereum?

Ethereum is a cryptocurrency similar to Bitcoin. It is probably the number two most popular cryptocurrency on the market right now.

As Bitcoin was the first cryptocurrency on the market, all of the alternatives that have come afterward have been measured against the Bitcoin. Not surprisingly, Ethereum has a relative value to Bitcoin. For example, look at what is probably the third most popular cryptocurrency: Litecoin. Litecoin has its own market, but the current price of Bitcoin, at the time of this writing, is around $7,00. Litecoin is only worth around $55. In case you’re wondering, the current price of Ethereum is nearly $290 per coin.

But it isn’t the price or the similarity to Bitcoin that makes this currency so unique. Bitcoin is simply a cryptocurrency. But Ethereum is an all-new ledger technology that is being used by companies around the world to build programs. Both Bitcoin and Ethereum operate on blockchain technology. The difference is, the Ethereum technology is much more advanced, which allows applications to be built over top of it.

Blockchain Technology

People tend to think of Bitcoin when they hear about blockchain technology, but there are lots of other applications that extend far past digital currency. In fact, there are hundreds of other ways that you can use blockchain technology.

But building blockchain applications has historically required a great deal of knowledge in cryptography and mathematics, as well as being highly skilled at coding. But today, everything from tracking assets to trading can make use of blockchain technology. Ethereum makes this possible by giving developers the tools they need to build applications that work with the blockchain.

A Simplified Explanation

A simplified explanation of ETH does not actually involve cryptocurrency at all. At the very basic level, Ethereum is a platform that allows developers to build decentralized apps using blockchain technology.

Ethereum and Bitcoin

Ethereum is similar to Bitcoin in some ways, but in other ways is quite different. Like Bitcoin, Ethereum is a blockchain network that is distributed publicly. There are some major technical differences, but the main thing to be aware of is that while Bitcoin is intended for pretty much a single purpose, Ethereum has varied purpose and capability.

The blockchain the Bitcoin uses is intended to keep track of who owns the digital currency, while the Ethereum blockchain is focused on maintaining any decentralized application that is running on the Ethereum programming code.

However, Ethereum is similar to Bitcoin in one respect. Like Bitcoin, miners work to earn currency, which is called ether. It is a tradable cryptocurrency, but it is also used to pay for things by developers of applications that run on the Ethereum network.

A Smart Contract

You use the term smart contract in order to describe programming code that allows for the exchange of money or property, or really anything of value, exactly the way that Ethereum uses it. A smart contract is like an application operating by itself when it runs on the blockchain. These programs run exactly how they should without being able to be censored or being subject to fraud.

All blockchains out there have the same ability as the Ethereum framework to process code. But most are very limited in how they can do that. ETH approached this in a completely different way. They allow developers to create whatever they want, basing it on the blockchain technology. If you are familiar with computer gaming, then think of Ethereum is a game engine that developers can then use to create their own games.

What Is The Ethereum Virtual Machine?

Before Ethereum was created, blockchain networks we’re limited to a very specific number of operations. For example, Bitcoin, and the other cryptocurrencies like it, were developed only to operate as digital currencies that worked peer-to-peer. These companies likely saw the potential of what something like Ethereum could do, but it was very complicated, expensive and would have taken a great deal of time to expand the set of functions that were offered by Bitcoin. The other choice was to create an entirely new blockchain method.

This was exactly why the ETH creator developed a brand new approach.

The Ethereum machine was created to run on the Ethereum network and it allows any program to run, no matter what programming language. Any program could easily run on the network with enough memory and time involved.

The virtual machine made creating applications easy to do and they even ran efficiently. This allowed the potential for thousands of different applications to be created.

The Potential Uses of Ethereum

What is so great about Ethereum is that developers are able to build applications that are decentralized, but serve a useful purpose to the users.

Bitcoin is an example of such an application. It provides users with a peer-to-peer currency system that allows Bitcoin payments to happen.

Since the applications are not centralized, they are not controlled by any one particular person or company.

Any decentralized services can be created using Ethereum. This means that there are thousands of potential industries that could be using Ethereum to fill needs and improve users lives. Bank loans, voting, regulatory compliance and many more uses can all be done with Ethereum.

In addition, Ethereum can be used to build decentralized autonomous organizations from the ground up. A DAO runs with programming code using an array of smart contracts that are all built on the Ethereum blockchain. This means that the normal rules and structure that comes with a specific organization can be thrown out the window. Everyone owns the DAO and everyone who owns tokens gets a specific vote, relating to their token value.

Ethereum Benefits

There are number of benefits the decentralized applications get because they run on the Ethereum blockchain.

  • First, they are unchangeable. These applications may not be changed by some third party
  • Since these apps are based upon a consensus, they cannot be censored
  • These applications are impossible to hack and free from any fraudulent activity
  • The apps never go down and cannot be turned off

Is there a downside?

Decentralized applications running on the Ethereum blockchain have a number of benefits, but that doesn’t mean that they are completely free of faults. First, the code running the smart contract is only as good as the person that created it. If there is something in the code that can be exploited, the only way to stop it is by a consensus to rewrite the code. Of course, the blockchain is intended to be unchangeable, and because these decentralized applications are specifically designed to be free of a central party, if someone were to have the power to change it, it would not be considered truly decentralized.

Current Ethereum Apps in Development

The Ethereum platform can be used to create applications over a huge range of industries. The future is wide open, and soon decentralized applications could be created in industries like finance, insurance real estate and many more.

How to Develop an App for Ethereum

There are lots of ways that people can use the Ethereum network. One of those is the Mist Browser, which is native to the Ethereum network. The Mist Browser provides both a digital Ethereum wallet and an easy-to-use interface. Users are able to use and store their ether, as well as write and manage smart contracts.

If you prefer to stick with your own browser, such as Google Chrome, there is an extension called MetaMask. The MetaMask browser extension allows for the development and use of decentralized apps directly from Google Chrome. Right now, Chrome is the only browser you can use it with, but there will eventually be support for Firefox, Internet Explorer/Edge as well as other browsers.

The Mist Browser, as well as extensions like MetaMask, makes blockchain apps easily accessible to just about everyone. Even if you don’t have any particular programming background, you may still be able to build apps, and that means that decentralized applications built on blockchain technology have an amazing potential for growth.

The Current State of Ethereum Application Development

As you know, the Ethereum platform can be used to create applications for just about any industry out there. But since this process is only just now beginning, it is impossible to know what will be a success and what will fail.

But some of the most exciting projects currently in development include:

Weifund: Platform for crowd funding that uses smart contract In enables any contributions to be change into digital add sets assets that are backed by a contract. These assets can then be treated within the Ethereum system.

Uport: This application is designed to give users a great deal of control over their identity. Uport offers tools that are secure and easy to use, allowing for an individual to control their personal information rather than relying on their government or trusting in third parties that may not have adequate security.

BlockApps: This is a series of tools that help people to build and manage their own blockchain apps. BlockApps provides a framework for anyone to create Blockchain application specific to their industry or uniquely suited to their needs.

Provenance: This application is striving to make the supply chain much more transparent. This means that you will be able to know exactly where a product comes from and how it got to you. The goal of this project is to give consumers information so that they can make the best buying decisions.

Augur: Finally, this application provides market forecasting an event for casting with rewards for making the right decisions. For example, someone could predict the winner of a political election by buying shares in a specific result. If that result becomes reality, the person receives winning shares which can be turned into monetary rewards.

 A Look Back at the DAO Hack

The whole point of ETH is to allow people to build their own decentralized autonomous organizations. In 2016, someone took advantage of a startup that was working on a DAO project. The DAO was hacked. The project was trying to create a venture capital firm that had no governing people behind it but instead used smart contract to allow investors to make decisions. Thousands of different people helped to raise the initial capital for the startup, with around $150 million dollars in tokens sold. However, the startup was attacked and around $50 million dollars’ worth of Ether was stolen.

The DAO software had a technical flaw that allowed this exploitation. It wasn’t the platform itself. However, the community took a vote and decided to change the code, moving the stolen Ether to a new smart contract. But not everyone liked that, because the technology was designed to be irreversible and unchangeable.

But the people behind ETH were between a rock and a hard place. On one hand, if they couldn’t recover the stolen Ether, then people wouldn’t trust the currency in the future. On the other hand, the recovery process basically negated the unchangeable and completely secure features.

The Ethereum Division

What eventually ended up happening was that most of the Ethereum community voted for the process to retrieve the stolen money. Those that did not split off from the main group. That meant that the original group of members that did not agree with retrieving stolen Ether are part of what it’s called Ethereum classic. Those that agreed with the retrieval process are part of Ethereum.

Both blockchains are completely identical. The only difference is the name and the history. But these two blockchains now work individually.

Ethereum in the Future

Despite the dire predictions that this currency would fail after the split, it is actually moving forward and has become the second most popular cryptocurrency out there. By providing a platform for people to use blockchain technology for their own applications, Ethereum is helping to decentralize the world economy and will change things for many industries in the future.

In the future, it is very likely that most companies will run all of their business on their own private blockchains. Some experts are predicting that this will happen within just a couple of years. Employees, customers, vendors and everyone else that interacts with a company will be able to access the private blockchain which is totally secure.

In addition, the platform is changing the way that business is done and the internet is used. This is a huge financial shift because decentralized apps are going to force fundamental change to the internet, from a place where information is freely shared to a place where currency can be exchanged immediately without any central organization or other parties involved. This is an exciting time to be involved with cryptocurrency in general and in particular with Ethereum. If you want to invest, or you simply wish to understand more about it so that you can use it successfully, there are plenty of resources out there, including the official website, which will tell you more about the unique mission of Ethereum.