Hello everyone! Today, I want to write my first part of a new series that will detail specific coins and tokens. I already wrote a pretty basic post about Bitcoin and the basics of Blockchain technology. The next coin to talk about is naturally Ethereum given it is currently the second largest Cryptocurrency by market cap. So let’s begin!
What is Ethereum?
Ethereum is another Blockchain based technology much like Bitcoin. Just like Bitcoin is an open source and distributed blockchain ledger and network. However, it differs greatly from Bitcoin in that Ethereum is meant to be a foundation for developers to build upon and deploy other decentralized software tools and applications. Bitcoin is mainly meant to enable peer-to-peer, electronic and decentralized value transfer. Bitcoin tracks transactions and performs a certain amount of data storage to track the values within addresses.
Ethereum, on the other hand, tracks value transfer and stores distributed data like Bitcoin but goes a step further. The main purpose is focused on running distributed computation and enabling decentralized applications. So, while Bitcoin is mainly a ledger of transactions, Ethereum is distributed storage and distributed computation. Ethereum can be thought of as one massive computer that executes a program and replicates the data on all computers on the network.
Ether is the main coin of the Ethereum network and can be thought of as the fuel that powers the distributed computation for applications on the blockchain. It is much like Bitcoin in that the transactions and holders of Ether are tracked and stored on the distributed ledger. If you want to run a platform on Ethereum, you must pay Ether to the miners who are processing the transactions. This Ether fuel is the motivation that incentivizes miners to support the network.
So how are these computations performed and managed? That is where Smart Contracts come into play! Smart contracts are simply small bits of computer code that manage the exchange or manipulation of data or value on the Ethereum network. They are written in various programming languages by users and then added the public Blockchain. Once added to the ledger, they can then be run simply by fueling it with gas. You create a transaction sending some ETH fuel to the contract with any additional information the contract needs. The arrival of the fuel triggers execution of its code across each mining computer on the network. The miners come to a consensus and the output is added to the Blockchain. Smart contracts can contain a series of conditions that, when met, trigger the transfer of equity, value, or property on the Ethereum network.
These smart contracts are incredibly important because these are the basis for the decentralized applications that run on the Blockchain. Because these Smart Contracts are run on a distributed, decentralized blockchain, they run exactly as programmed on each node without anyone able to affect them. While most Blockchains have the ability to process code, they often only allow for a very small set of operations. Ethereum was the first to allow anyone to develop whatever operation them want as long as they have the Ether to pay for it to run on the network.
Ethereum’s Potential Uses
So what do these Smart Contracts give us? Well, these unlock an almost unlimited amount of potential uses. Because these contracts can be built up into very complex code, very robust platforms can be built to create decentralized implementations of many tasks. Many developers are currently developing such platforms to perform a wide array of tasks that will eliminate all central control. Many of these developers use Tokens to represent equity in their project or as fuel to perform some ability like request a payment or place a bet.
Ethereum is an exciting concept because theoretically it can create a self-sustaining, decentralized super computer that can store data, run applications, and facilitate communications. It is spread over a vast number of computers around the world and cannot be tampered with. That means no government or entity will be able to control these tasks and allows for users to remain anonymous. Very excited to see where the Future of Ethereum will lead!