🔥 Ethereum Wiki- ETH course, guide, cryptocurrency & more!
If you want to know what Ethereum is, how it works, and what it can be used for without going deep into the technical abyss, this guide is for you.
Ethereum is a global, decentralized platform for money and new types of applications. On Ethereum, you can write code that controls the money and build applications that are accessible anywhere in the world.
Is Ethereum Better Than Bitcoin?
Although often associated with Bitcoin, blockchain technology has many other uses that go well beyond digital currencies. In fact, Bitcoin is just one of several hundred applications that use blockchain technology today.
Until relatively recently, building blockchain applications required a complex background in coding, cryptography and mathematics as well as considerable resources. But the times have changed. Previously unimagined applications, from electronic voting & digitally recorded assets to regulatory compliance & trade, are now being actively developed and deployed faster than ever. By providing developers with the tools to create decentralized applications, ethereum makes all of this possible.
What is Ethereum?
- November 2013: Vitalik Buterin publishes the Ethereum white paper.
- January 2014: The development of the Ethereum platform was publicly announced. The original Ethereum development team consisted of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio and Charles Hoskinson.
- August 2014: Ethereum ends its ICO and raises $ 18,4 million.
- May 2015: The test network publications from ethereum are "Olympic".
- July 30, 2015: The first stage of Ethereum development, "Frontier", has been published.
- March 14, 2016: Homestead, the first "stable" Ethereum release, ran out in block 1.150.000.
- June 2016: The DAO hack happens and the $ 50 million worth of Ethereum, which at the time made up 15% of all Ethereum coins in circulation.
- October 25, 2016: Ethereum Classic forks away from the original Ethereum protocol.
- October 16, 2017: The Metropolis Byzantium Hard Fork update takes place.
- February 28, 2019: The Metropolis-Constantinople-Hard Fork-Update takes place.
In the simplest case, Ethereum is an open software platform that is based on blockchain technology and enables developers to create and use decentralized applications.
Is Ethereum Similar to Bitcoin? Yes but no.
Like Bitcoin, Ethereum is a distributed public blockchain network. While there are some significant technical differences between the two, the most important difference to note is that Bitcoin and Ethereum differ significantly in purpose and performance. Bitcoin offers a special application of blockchain technology, a peer-to-peer electronic cash system that enables online Bitcoin payments. While Bitcoin is used to track ownership of digital currency (bitcoins), Ethereum focuses on running the program code of any decentralized application.
In Ethereum, instead of mining for bitcoins, miners work to mine Ethereum, a type of crypto token that powers the network. In addition to a tradable cryptocurrency, application developers also use Ethereum to pay for transaction fees and services on the Ethereum network.
There is a second type of token that is used to pay the miners fees for entering transactions into their block, it is called gas, and with every smart contract execution, a certain amount of gas must be sent to trick the miners into doing so to add them to the blockchain.
"Bitcoin is primarily a currency; this is a special application of a blockchain. However, it is far from the only application. To give an example of a similar situation from the past, email is a particular application of the Internet and certainly helped popularize it, but there are many others.”- Gavin Wood, co-founder of Ethereum
What is an Ethereum Smart Contract?
Smart contract is just a phrase used to describe a computer code that can facilitate the exchange of money, content, property, stocks or other valuables. When a smart contract runs on the blockchain, it behaves like an independently working computer program that is automatically executed when certain conditions are met. Since smart contracts run on the blockchain, they run exactly as programmed, without the possibility of censorship, downtime, fraud or third-party interference.
While all blockchains have the ability to process code, most are severely limited. Ethereum is different. Instead of giving a set of limited operations, Ethereum allows developers to create whatever operations they want. That means developers can create thousands of different applications that go way beyond anything we've seen before.
Ethereum virtual machine
Before the creation of Ethereum, applications were designed for a very limited number of operations. Bitcoin and other cryptocurrencies, for example, were developed solely to operate as digital peer-to-peer currencies.
The developers faced a problem. Either they expand the functionality of Bitcoin and other types of applications, which is very complicated and time-consuming, or they develop a new blockchain application and a completely new platform. The creator of Ethereum, Vitalik Buterin, recognized this dilemma and developed a new approach.
The central innovation of Ethereum, the Ethereum Virtual Machine (EVM), is a complete software from Turing that runs on the Ethereum network. It allows anyone to run any program, regardless of the programming language, for which there is enough time and memory. Ethereum's virtual machine makes the process of building blockchain applications much easier and more efficient than ever. Rather than having to create a completely new blockchain for each new application, Ethereum enables the development of potentially thousands of different applications on one platform.
What can Ethereum be used for?
Ethereum enables developers to build and deploy decentralized applications. A decentralized application, or Dapp, serves a specific purpose for its users. Bitcoin, for example, is a Dapp that provides its users with a peer-to-peer electronic cash system that enables online Bitcoin payments. Since decentralized applications are made up of code running on a blockchain network, they are not controlled by a single or central unit.
All services that are centralized can be decentralized with Ethereum. Think of all of the intermediary services that exist in hundreds of different industries. From obvious services like loans provided by banks to brokerage services that most people seldom think about such as title registers, voting systems, regulatory compliance, and more.
Ethereum can also be used to build Decentralized Autonomous Organizations (DAO). A DAO is a completely autonomous, decentralized organization without a single leader. DAOs are operated by a program code based on a collection of smart contracts written on Ethereum. The code is intended to replace the rules and structure of a traditional organization, eliminating the need for people and centralized control. A DAO belongs to everyone who buys coins, but instead of every coin that corresponds to shares and ownership, the coins act as contributions that give people a vote.
"A DAO consists of one or more contracts and could be funded by a group of like-minded people. A DAO works completely transparently and completely independently of any human intervention, including its original creator. A DAO stays on the network as long as it covers its survival costs and provides a useful service to its customer base.”- Stephen Tual, former CCO Ethereum
Ethereum is also used as a platform for the introduction of other cryptocurrencies. Due to the ERC20 token standard defined by the Ethereum Foundation, other developers can issue their own versions of this token and raise funds with an Initial Coin Offering (ICO). With this fundraising strategy, the issuers of the token determine an amount that they want to raise, offer it in a crowd sale and receive Ethereum in return. Over the past two years, ICOs have raised billions of dollars on the Ethereum platform, and one of the most valuable cryptocurrencies in the world, EOS, is an ERC20 coin.
Ethereum recently created a new standard called the ERC721 token for tracking unique digital holdings. One of the biggest use cases for such tokens is currently digital collectibles, as the infrastructure makes it possible to prove ownership of scarce digital goods. Many games are currently being developed using this technology, such as Overnight Hit CryptoKitties, a game where you can collect and breed digital cats.
What are the advantages of a decentralized Ethereum platform?
Since decentralized applications run on the blockchain, they benefit from all of its properties.
- Immutability: A third party cannot make changes to data.
- Corruption & security against manipulation: Apps are based on a network that is formed around the principle of consensus and makes censorship impossible.
- Security: Since there is no central point of failure and the applications are secured by cryptography, they are well protected against hacker attacks and fraudulent activities.
- Zero downtime: Apps never go out and can never be switched off.
What is the downside of decentralized Ethereum applications?
While they have a number of advantages, decentralized applications are not flawless. Because the code for smart contracts is written by people, smart contracts are only as good as the people who write them. Errors in code or oversights can result in unintended adverse action being taken. When a bug in code is exploited, there is no other efficient way to stop an attack or exploitation other than reaching network consensus and rewriting the underlying code. This contradicts the nature of the blockchain, which is supposed to be immutable. Also, any action by a central party raises serious questions about the decentralized nature of an application.
I want to develop an app. How can I access Ethereum?
There are many ways in which you can hook into the Ethereum network. One of the easiest ways is to use the native Browser, Mist. Mist provides an easy-to-use interface and digital wallet for users to trade and store Ethereum, as well as to write, manage, deploy and use smart contracts. Just as web browsers provide access and help people navigate the Internet, Mist offers a portal into the world of decentralized blockchain applications.
There is also the MetaMask browser extension that turns Google Chrome into an Ethereum browser. With MetaMask, anyone can easily run or develop decentralized applications from their browser. Although originally developed as a Chrome plug-in, MetaMask also supports Firefox and the Brave Browser.
While it's still in its infancy, Crap, MetaMask, and a host of other browsers seem capable of making blockchain-based applications accessible to more people than ever before. Even people with no technical background can potentially create blockchain applications now. This is a revolutionary leap for blockchain technology that could bring decentralized applications into the mainstream.
What apps are currently being developed on Ethereum?
The Ethereum platform is used to build applications for a wide range of services and industries. But developers are in uncharted territory, so it is difficult to know which applications will succeed and which will not. Here are a couple of exciting projects.
- Weifund offers an open platform for crowdfunding campaigns that makes use of smart contracts. It enables contributions to be converted into contractually secured digital assets that can be used, traded or sold within the Ethereum ecosystem.
- UPort provides users with a safe and convenient way to take complete control of their identity and personal information. Instead of relying on government institutions and giving their identities to third parties, users control who can access and use their data and personal information.
- BlockApps wants to provide companies with the easiest way to build, manage and implement blockchain applications. From proof-of-concept to complete production systems and integration with legacy systems, Blockapps offers all the tools you need to create private, semi-private and public sector-specific blockchain applications.
- Origin uses Ethereum to make opaque supply chains more transparent. By tracing the origins and history of products, the project aims to create an open and accessible information framework so that consumers can make informed choices when purchasing products.
- Augur is an open source forecasting and market forecasting platform that enables anyone to predict events and be rewarded for predicting them correctly. Predictions about future events in the real world, such as who will win the next US election, are made through trading in virtual stocks. When a person buys stocks in a profit forecast, they receive a monetary reward.
"Ethereum is a spectacular public experiment showing the value of smart contracts on a public blockchain. It is the result and source of disruptive innovations that we have not seen since the dawn of the internet". - Caleb Chen London Trust Media
The DAO hack that threatened everything
Do you remember how Ethereum can be used to build decentralized autonomous organizations? Well, something bad happened in 2016. A start-up working on a specific DOA project, aptly named "The DAO", was hacked.
The DAO was a project developed and programmed by a team behind another startup called Slock.it. Their goal was to build a venture capital company that would enable investors to make decisions through smart contracts. The DAO was funded through a token sale and ended up raising approximately $ 150 million from thousands of different people.
Shortly after the funds were raised, the DAO was hacked by an unknown attacker who at the time stole around $ 50 million worth of Ethereum. While the attack was made possible by a technical bug in the DAO software, not the Ethereum platform itself, the developers and founders of Ethereum were forced to grapple with the mess.
A hard fork in Ethereum
After much debate, the Ethereum community voted and decided to get back the stolen funds by doing something called a hard fork or code change. The hard fork moved the stolen funds to a new smart contract that should allow the original owners to withdraw their coins. But this is where things get complicated. The implications of this decision are controversial and the subject of heated debate.
Because Ethereum is based on blockchain technology, in which all transactions should be irreversible and unchangeable. By executing a hard fork and rewriting the rules by which the blockchain is executed, Ethereum has set a dangerous precedent that goes against the very essence of the blockchain. If the blockchain is changed every time a sufficiently large sum of money is involved or enough people are negatively affected, the blockchain loses its main use - secure, anonymous, tamper-proof and immutable.
While another, less aggressive "soft fork" solution was proposed, it placed the Ethereum community and its founders in a dangerous position. If they didn't get back the investors' stolen money, confidence in Ethereum could be lost. On the other hand, the recovery of investor money required measures that ran counter to the central ideals of decentralization and set a dangerous precedent.
The consequences - Ethereum is splitting
In the end, the majority of the Ethereum community voted to do a hard fork and get the DAO investor's money back. But not everyone agreed with this approach. This led to a split where two parallel blockchains now exist. For those members who do not agree to changes to the blockchain even if there is hacking, there is Ethereum classic. For the majority who agreed to rewrite a small portion of the blockchain and return the stolen money to their owners, there is Ethereum.
Both Ethereum blockchains have the same features and are identical in every way up to a certain block in which the hard fork was implemented. This means that everything that happened on Ethereum up to the hard fork is still valid on Ethereum Classic. From the block in which the hard split or code change was carried out, the two Ethereum blockchains act individually.
Despite the impact of the DAO hack, Ethereum is advancing and looking to a bright future. By providing a user-friendly platform that enables people to harness the power of blockchain technology, Ethereum is accelerating the decentralization of the global economy. Decentralized applications have the potential to profoundly disrupt hundreds of industries including finance, real estate, academia, insurance, healthcare, the public sector, and many others.
Most major companies will run business processes on their private blockchains. Private Blockchains: Within two years, large companies will be running multiple business processes on their own private, approved corporate blockchains. Employees, customers, suppliers and service providers in every company will be able to securely access the company's private blockchain via strong cryptographically authenticated transactions.
Consortia blockchains: In two years' time, many companies will have started building bottom-up consortia blockchains with a small number of counterparties in their ecosystem working together in a small number of use cases to create a trustworthy infrastructure, supply chain or value chain to share with a trusted source of truth.
Business use of public blockchains: Some companies use public Ethereum in their use cases, which use the same stack of blockchain components that they bought or built for their private Ethereum-based implementations.
What is Ethereum: Conclusion
The Ethereum platform is also helping to transform the way we use the internet. Decentralized applications are forcing a fundamental change from an Internet of Information, in which we can view, exchange and communicate information immediately, to an Internet of Values, in which people can exchange direct values without intermediaries.
Even if it is still at the beginning and there will undoubtedly be more hurdles to overcome, Ethereum seems to be a truly transformative platform. With many of the most exciting applications yet to be developed, we can only begin to wonder about the unimagined possibilities that await us.