What is Ethereum? A Beginners Guide

Ethereum is based on blockchain technology that enables developers to build and deploy decentralized applications. Ethereum is an open source platform similar to Bitcoin as they both work in a distributed public blockchain network. The most important difference is that Bitcoin and Ethereum differ substantially in purpose and capability although there are some significant technical differences between the two. In the Ethereum blockchain, miners work to earn Ether than mining bitcoins. Ether is also used by application developers to pay for transaction fees and services on the Ethereum network Beyond a tradeable cryptocurrency. Bitcoin offers a peer to peer electronic cash system that enables online Bitcoin payments which is a particular application of blockchain technology. Ethereum blockchain focuses on running the programming code of any decentralized application whereas the Bitcoin blockchain is used to track ownership of digital currency. By providing developers with the tools to build decentralized applications such as from electronic voting & digitally recorded property assets to regulatory compliance & trading. The job market is in a sudden demand for blockchain developers which is hard to keep up with. Some universities and private companies have responded by offering a range of blockchain related courses in an attempt to meet the needs of industry.

Smart Contract

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Ethereum blockchain has some extraordinary capabilities. It can build smart contracts. They run exactly as programmed without any possibility of censorship, downtime, fraud or third party interference as smart contracts run on the blockchain. Smart contract is computer code that helps in the exchange of money, content, property, shares, or anything of value. Ethereum allows developers to create whatever operations they want and doesn’t provide a set of limited operations like other blockchain. Thousands of application can be built using Ethereum blockchain.

The Ethereum Virtual Machine

Blockchain applications were designed to do a very limited set of operations before the creation of Ethereum. Most cryptocurrencies were developed to operate as peer-to-peer digital currencies. Developers wanted to expand the set of functions offered by these cryptocurrencies like Bitcoin, which was very complicated and time-consuming. The development of a new blockchain application and an entirely new platform was considered a better option. Hence considering the requirements, Vitalik Buterin, invented Ethereum for improving the functionality of cryptocurrencies. Instead of building an entirely new blockchain for different applications, Ethereum helps to develop thousands of different applications in a single platform.

Ethereum Virtual Machine (EVM) is Turing complete software that runs on the Ethereum network and is Ethereum’s core innovation. It does not depend on the programming language used hence any program could be run given enough time and memory. The Ethereum Virtual Machine creates blockchain applications much easier and efficient.

How can I Access Ethereum?

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Even people without a technical background can now potentially build blockchain apps. Mist has a decentralized blockchain application platform that provides a user-friendly interface & digital wallet for users to trade & store Ether as well as write, manage, deploy and use smart contracts. MetaMask browser extension turns Google Chrome into an Ethereum browser. MetaMask is an application that allows to easily run or develop decentralized applications from their browser.

What are the Benefits of Ethereum?

The properties of Ethereum are it’s benefits:

1) Secure – applications are well protected against hacking attacks and fraudulent activities with no central point of failure and secured using cryptography.

2) Zero downtime – Apps never go down and can never be switched off.

3) Immutability – any changes to data cannot be done by a third party .

4) Corruption & tamper proof – Apps are based on a network formed around the principle of consensus, making censorship impossible.

What are the Uses of Ethereum?

1) Builds Dapp: Ethereum enables developers to build and deploy decentralized applications. decentralized applications are not controlled by any central entity. Bitcoin is a Dapp that supports peer to peer electronic cash system for Bitcoin payments.

2) Conversion: using Ethereum, any services that are centralized can be decentralized. services like loans provided by banks and intermediary services like title registries, voting systems, regulatory compliance etc can be modified.

3) Builds DAO’s: It can be used to build Decentralized Autonomous Organizations (DAO). A DAO is owned by who purchases tokens that act as contributions that give people voting rights. DAO is decentralised organisations run on a collection of smart contracts written on the blockchain. The code is designed to replace the rules and structure of a traditional organization.

Drawbacks of Decentralised Applications

Even though DApps provides number of benefits, they aren’t faultless. as smart contract code is written by developers, there are chances for code bugs or oversights can lead to unintended adverse actions. If a mistake happens in the developed code nothing can stop it from destruction or exploitation. This can only be avoided by obtaining a network consensus and rewriting the underlying code. Any action taken by a central party raises serious questions about the the blockchain property of immutability and the decentralized nature of application.

 

 

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