Blockchain is to Bitcoin what the Internet is to email. It is a great electronic system on which applications can be built. And coins are just one of them. Over time we will see a wide range of applications in many different areas, such as voting, global supply chains, medical records, the financial system and others yet to be discovered.
It’s a cryptocurrency based on Blockchain technology
Unlike Bitcoin, it allows you to operate Smart Contracts on your Network
Its possible applications go beyond what is currently imaginable
A network that allows you to operate
The term smart contract is used to describe the programmable code that can facilitate the exchange of money, content, property, stocks or anything of value. A smart contract becomes a self-operating computer program that runs automatically when the specific conditions written on it are met.
Is the second cryptocurrency
It is currently the 2nd largest cryptocurrency by capitalization, only behind Bitcoin. Its price has evolved very positively over time and will continue to do so if its predictions are fulfilled.
OPERATES IN A DECENTRALIZED NETWORK
Like Bitcoin, no bank or government controls or issues Ethereum’s network and Ether’s tokens; therefore, it is an open network built in 4 phases, managed by its users, eliminating intermediaries.
IS BASED ON CRYPTOGRAPHY
Without a central point of failure and protected by the latest advances in cryptography, Ethereum-based applications are well protected against piracy attacks and fraudulent activities.
What is Ethereum?
Imagine you have a magic book. There are other people in the world who also have an equal copy of that magic book.
They can all write in that book; if someone writes something in the book, it appears in all the other copies of the book, all over the world, almost instantaneously.
No one, not even you, can erase what you have written in the book or what someone else has written. This is basically the blockchain technology, on which Bitcoin, Ethereum and all the other cryptocurrencies are based.
Bitcoin, for example, uses the magic book only to record transactions of the virtual currency “bitcoin” and for nothing else. It is a magic book of accounting.
To use it, you would basically write in the book:
«I’m sending 3 bitcoins to Joseph».
Then the magic book would check all past transactions to see if I had that many bitcoins in the first place and, if so, it would send all three bitcoins to Joseph.
Joseph now has an entry in his magic book that says he also has bitcoins, so if he tries to send one, the magic book can confirm it.
Ethereum goes further, because in their magic book we can write small programs that “run themselves” and cannot be removed.
It is a magic book in which you can write programs or contracts and also works with coins, called ‘Ether’.
Then, for example, you could write in the book:
«I bet 1.5 Ether with Ana that the weather on May 2nd is sunny and pleasant in the city of Barcelona».
Ana and I would sign the bet and include a link to the Google Weather data so that the program could verify that this is true or not on May 2nd.
Also, as it is a book that needs order and maintenance, I would pay a small fee to use the magic book and implement the program.
If it rains on May 2nd, the program would automatically send 1.5 Ether from Ana’s wallet to my wallet.
The funny thing is that Ana does not have to trust me, the writer of the phrase in the book (creator of the program), but she can verify my code by herself.
In addition, the program cannot be removed suddenly, as it is copied into every magic book in the world.
So Ethereum is basically a gigantic, coordinated swarm of connected magical books -computers- where anyone can implement their mini-programs -called smart contracts- for a small fee.
As we have seen, the main function of Ethereum’s magic book is not to be an accounting book in which only transactions are written, as in the case of Bitcoin.
Ethereum’s magic book has many more utilities!
Opinions about the present and future
What do experts say?
«Like Bitcoin, nothing will stop the Ethereum from becoming an alternative currency to the current fiat currencies. You can negotiate anything using Ethereum, but that’s not your main strength compared to other cryptocurrencies – everyone can do that. It is rather the computer language that allows smart contracts to exist that makes Ethereum even more valuable than Bitcoin.»
Jeff ReedAuthor of the book ‘Investing in Ethereum’.
“Governments around the world have spent hundreds of trillions of dollars rescuing a decadent, Dickensian and antiquated system called banking, when the solution to the future of finance is ‘peer-to-peer’. The future will be cryptocurrencies and there will be no banking system like the one we had before 2008”.
Patrick YoungFinancial Analyst
“With an electronic currency based on cryptography, without the need to rely on an intermediary, money can be safe and transactions effortless.”
Satoshi NakamotoBitcoin’s creator
“Virtual currencies can be a great long-term promise, especially if their innovations promote a faster, safer and more efficient payment system.”
Ben BernankeUS FED Chairman
“We have chosen to put our money and faith in a mathematical framework that is free of politics and free of human error.”
Tyler WinklevossEntrepreneur and millionaire investor
“The cryptocurrencies will do to the banks what e-mail did to the postal industry in its day.”
Ethereum seeks to be a “global computer” through which everyone connected to the Internet can interact, adding and using their programs or applications.
Like Bitcoin, it is a decentralized platform – that is, not controlled by anyone in particular – that operates on a Blockchain or ‘chain of blocks’.
Bitcoin offers a single application, which is to be a payment system, while Ethereum allows anyone to execute code on its network and, therefore, its applications go much further and are practically infinite.
Its platform supports, among others, Smart Contracts, DAOs and Ðapps and in turn uses Ether, its cryptocurrency, as fuel to interact with it.
It was conceived by the young Russian Vitalik Buterin in 2014, later helped by other programmers and financed collectively. It is currently in its third phase of development.
How exactly does it work?
Ethereum, instead of operating on typical servers like any Internet company, operates through “nodes” managed by volunteers from all over the world, thus forming an infrastructure that we can call “global computer”.
These nodes are also computers, of course, just like a server, but what differentiates them from them is not their way of being physical, but what they devote their resources to maintaining the entire Ethereum network.
Nodes are connected to each other thanks to the Internet and the blockchain that supports them, so that a change in one of them is automatically reflected in all the others.
On the other hand, the Ethereum platform is open source, which means that any developer can see how it is built and modify or improve it, as well as create new applications on top of it thanks to EVM.
The Ethereum Virtual Machine (EVM) is software running on the Ethereum network. It allows anyone to run any program, regardless of the programming language used.
It makes the process of creating applications on top of the blockchain much easier and more efficient.
Instead of having to build a totally original chain of blocks for each new application, Ethereum allows the development of potentially thousands of different applications, all on a single platform.
What is Ethereum for??
The initial purpose of the Ethereum project is to decentralize and anonymize the Internet.
This means taking away the power to treat personal information from those large online companies that currently control it and returning it to the users, its legitimate owners.
On the other hand, it allows total anonymity in the network, allowing complete freedom of expression and trade worldwide.
Let us take a look at a large part of its current applications:
What applications can be given to it?
Ethereum is such a novel platform that even today new utilities are being found for it.
It allows such a wide range of innovation that these are just a few applications:
Cryptocurrency and payment system
The ‘Ether’ is the fuel that makes Ethereum work -since it is used to compensate the nodes for maintaining the platform- however it can also be used as a cryptocurrency, just like Bitcoin.
The payments made in Ether are validated by the nodes participating in the network and registered in their blockchain.
The Ether is not like most cryptocurrencies, since it is not only used to reflect transactions of monetary value, but also allows the application of so-called Smart Contracts.
Smart Contracts are simply lines of code that allow to facilitate the exchange of money, content, property, shares or anything of value.
Once written and added to the Blockchain, a smart contract becomes a computer program that runs automatically when certain conditions are met.
It is added to the Blockchain precisely so that it runs as programmed without the possibility of censorship, downtime, fraud or third-party interference.
They are programmed in a language called Solidity and use the so-called ‘gas’ as a commission proportional to the resources it consumes, in order to avoid accidental infinite loops, computer attacks, inefficiencies, or other computational waste in the written code.
Allows developers to build and implement decentralized applications or Ðapps. These user-facing applications may look the same as the others, however they are not controlled by any individual or central entity, but by their users.
On the other hand, they have some features that make them more attractive, such as the elimination of intermediaries, increased security or transparency.
They interact with Smart Contracts to carry out their function and use Blockchain as their ‘backend’.
Bitcoin, for example, could be considered a Ðapp that provides its users with an electronic money system that allows online payments.
Ethereum can also be used to create Decentralized Autonomous Organizations (DAOs).
We can imagine a leaderless company as a DAO, fully autonomous and decentralized. Its rules are predefined and executed by programming code, in a collection of Intelligent Contracts written in the Ethereum blockchain.
This code is designed to replace the rules and structure of a traditional organization, eliminating the need for people and centralized control.
A DAO is owned by everyone who acquires its tokens, but instead of each token equating to shares or ownership, tokens give people voting rights.
From these applications seen so far -Cryptocurrency, Smart Contracts, Ðapps and DAOs- there appear multitude of other applications as for example:
The Internet of Things (IoT) is a field in which any physical object is expected to be connected to the Internet.
Projects based on existing Ethereum aim to digitally block and unblock any asset and turn it into an income through an online rental.
Things like cars, apartments, electricity, Wifi, and a long etcetera can be rented directly between two people without the need to know each other and without trust problems.
Crowdfunding is a method of project financing in which an individual or company presents a business idea, for which they will need to collect the necessary money in a given time through contributions from the public.
With Ethereum, through Smart Contracts, the individual or company launches a fixed idea, a goal and an amount to receive as funding to start the project.
If successful, the contract executes itself by automatically sending the money to the person who took the initiative with 0% commissions.
Online gaming platform
Many people when playing at online casinos have the feeling that the experience is not entirely clean, as if the bad cards, bad runs or bad results in general are given in a more usual way than the probability of these games usually offers.
Ethereum, on the other hand, is able to encode casino games, such as poker, roulette or blackjack. In other words, you can consolidate an online casino that is governed by the same probability rules of an earthly casino. No traps or private fees.
Market forecasting offers speculators and market makers to bet on events that have only two possible outcomes (binary results, yes/no).
In Ethereum’s blockchain, there is a problem when it comes to taking data from the real world: you need an intermediary called Oracle. This Oracle is an instrument through which it allows Smart Contracts to update their status with information coming from outside the blockchain.
This would make it possible, among other things, to make a market prediction. There are decentralized projects underway that already address this issue.
Unfortunately, voting systems in many parts of the world are unreliable.
There are situations such as the validity of a minor’s vote, that a person can vote more than once, that there is censorship or that voting information is changed. This shows a corrupt system, with many fissures involving a third party.
With Ethereum and its Smart contracts, it is possible to make fair and verifiable elections. Each person would have only one vote, with the same value as the rest, impossible to modify or invalidate.
What are the benefits?
Ethereum brings us different benefits compared to other ways of organizing, exchanging and accessing information:
The system works like a ledger, where the account is kept of everything that happens in the network, of all the transactions carried out. This information, once verified by the nodes of the network and pointed, cannot be erased.
This immutable character makes Ethereum a reliable system that imparts confidence to its users.
Ethereum uses a set of rules based on cryptography. To carry out transactions, public and private keys are needed so that messages can only be decrypted by their addresses.
They guarantee that all transactions take place in a confidential and maximum security environment.
Each and every one of the nodes that make up the Ethereum network has full access to that Blockchain to consult, review and verify any of the registered transactions.
In this way, the veracity and transparency of the information are guaranteed at all times.
Being a system in which all participants have the same power within the network, it eliminates the hierarchical factor of an entity -whether person, company or machine- that controls everything.
This eliminates the single point of failure: now if one participant fails, the network remains the same thanks to the other participants and nothing happens.
The Ethereum blockchain is a string of open source blocks, which means that any beginner or advanced programmer can get the source code from the network to work on it.
This brings us a system in which anyone can collaborate and contribute new ideas, as it allows copying, modification and distribution.
Ethereum allows operating costs to be drastically reduced. Being a decentralized system, there are no intermediaries in the transactions, thus eliminating the tasks of register control, and data distribution.
This reduces the use of personnel in areas where a third party is needed, thus improving the economy in transactions.
The future of Ethereum
Ethereum is slowly moving towards a bright future. By providing a user-friendly platform that allows people to harness the power of Blockchain technology, it is accelerating the decentralization of the global economy.
Here we have exposed only some of its possibilities, as an extremely powerful tool. Yet its future uses are so many and so varied that even its founders escape reason.
Decentralized applications have the potential to deeply disrupt hundreds of industries, including finance, real estate, academia, insurance, health and the public sector among many others.
Ethereum will have the same influence on our communications, on our entire information infrastructure, as the Internet has had so far. It will affect every aspect of our existence.
Moving on to a somewhat more subjective analysis, we dare say that Ethereum takes the best of Bitcoin and applies it not only to the monetary system, but to all other spheres of our life.
Where Bitcoin intended to be a financial alternative to the capitalist centralism dominant until now, Ethereum expands that open vision and tries to make reality what until now was a simple utopia: to return personal power to each individual in our society.
It is practically as if he were taking only the beneficial parts of such disparate systems as capitalism, socialism, communism and anarchism, wrapped them in a free market economy and agreed to work among them harmoniously, leaving aside the not-so-good parts.
Time will tell if it is possible to carry out such an incredible project.
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