An Introduction To Ethereum

Design by Miguel Norberto

Ethereum was created in 2013 by Vitalik Buterin, a Russian-Canadian programmer who had been interested in bitcoin since 2011.

He was inspired to develop Ethereum after reading a white paper describing bitcoin’s blockchain technology.

Like bitcoin, Ethereum is a distributed public blockchain network. However, Ethereum’s blockchain uses a different consensus algorithm called proof of work (PoW) that allows for more flexibility than bitcoin’s algorithm.

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference.

Ethereum is powered by the ether token, traded on cryptocurrency exchanges for other digital currencies or fiat money. This article will explore how Ethereum works and why it has become so popular.

How do Ethereum works?

Ethereum uses a blockchain, like Bitcoin, to record transactions.

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference. Ethereum is powered by the Ether cryptocurrency, which can be mined or traded.

The Ethereum network went live on July 30th, 2015. In the first year, the network processed over 18 million transactions. Ethereum has since become the world’s second-largest cryptocurrency after Bitcoin.

Ethereum was designed to be reliable, secure, and easy to use.

To understand Ethereum, you need first to understand Bitcoin. Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a dispersed public ledger called a blockchain. Bitcoin is unique because there are a finite number of them: 21 million.

Ethereum builds on the innovation of Bitcoin by adding features like executable smart contracts. Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller written into the code itself. The result is a system that automates trust and eliminates the need for third parties like lawyers or escrow agents.

What can Ethereum be used for?

Ethereum enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or futures contract), and many other things that have not been invented yet, all without a middleman or counterparty risk.

Ethereum can be used in a variety of places. For example, it can be used for developing applications. Ethereum also allows for the creation of smart contracts. These contracts are executed when certain conditions are met.

This makes it possible to create contracts that are automatically enforced. Ethereum can also be used for creating digital assets. These assets can be used to represent ownership of items or rights.

Applications of Ethereum

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference. Ethereum is unique because it allows developers to create their decentralized applications (dapps) on the platform.

One example of a dapp built on Ethereum is Augur, a prediction market platform. Augur allows users to bet on the outcome of various events and win or lose money based on the accuracy of their predictions. Another example is EtherTweet, a Twitter clone that allows users to send messages stored on the Ethereum blockchain.

The potential for Ethereum-based dapps is limitless, and we can expect to see many more innovative applications launched in the near future.

What are Ethereum Smart Contracts?

Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance. Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference.

These apps run on a custom-built blockchain, an enormously powerful shared global infrastructure that can move value around and represent property ownership.

How do Ethereum Smart Contracts work?

The following is a high-level overview of how Ethereum smart contracts work:

  1. A smart contract is a computer program that runs on the Ethereum blockchain.

  2. Smart contracts are written in Solidity, a programming language designed for writing smart contracts.

  3. When a user sends a transaction to the Ethereum network, the network verifies that the user has enough ether to pay for the transaction.

  4. The network then uses the user’s ether to pay for gas, which runs the smart contract.

  5. The network then broadcasts the transaction to all of the nodes on the Ethereum network.

  6. The nodes then verify the transaction and run the smart contract code.

  7. The nodes then broadcast the contract results to all of the other nodes on the network.

Example of a Smart Contract

A smart contract is a self-executing contract with the terms of the agreement between buyer and seller are directly written into the code. Computers in the blockchain network execute smart contracts. Once all the parties agree to the smart contract, it automatically executes according to the pre-programmed rules. There is no need for a third party to enforce or monitor the contract.

Nick Szabo first proposed smart contracts in 1994, but they did not become widely known until implemented on the Ethereum blockchain in 2015. Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference.

One of the most popular uses of Ethereum smart contracts is to create tokens. A token is a digital asset that can represent anything from virtual currency to shares in a company.

The benefits of using Ethereum Smart Contracts

The benefits of using Ethereum Smart Contracts are:

-They are secure because the blockchain executes them.

-They are transparent because they are publicly auditable.

-They are reliable because they are executed exactly as programmed.

-They provide a high level of certainty because they cannot be altered or reversed once deployed.

The risks associated with using Ethereum Smart Contracts

The Ethereum platform is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference.

Ethereum is a young project and, as such, is still susceptible to attack. For example, in June 2016, $50 million worth of ether was stolen by hackers who exploited a vulnerability in the DAO, a decentralized autonomous organization based on the Ethereum platform.

To prevent similar attacks in the future, Ethereum developers are working on a new protocol called Casper which will move the network from a proof-of-work to a proof-of-stake system.

Decentralized Autonomous Organizations?

A Decentralized Autonomous Organization, or DAO, is a self-governing organization run by rules encoded in computer code. These rules are implemented through smart contracts on a blockchain platform such as Ethereum. DAOs are designed to be autonomous, meaning that they can operate without human intervention.

DAOs can be created in two ways. The first way is through a crowd-sale, an Initial Coin Offering (ICO). In an ICO, the creators of the DAO sell tokens that represent shares in the organization.

The second way to create a DAO is by forking an existing blockchain platform such as Ethereum and creating a new DAO on top of it.

Conclusion

Ethereum is a powerful platform with a lot of potential for the future. It is still in its early stages, so there is plenty of room for growth. However, developers are hard at work creating new applications and improving the platform, and the community is growing rapidly.

Ethereum will become a dominant player in the cryptocurrency world and will revolutionize how businesses operate. If you are interested in learning more about Ethereum or investing in it, I recommend doing your research and watching for upcoming announcements.

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