Ethereum is the 2nd largest cryptocurrency in the world after Bitcoin. But I think so you already know this. Unless you are playing video games all day long and are completely oblivious to this fundamental fact regarding cryptocurrency. So without wasting your time, I’m going to share with you in this post: Ethereum for a beginner.
What is Ethereum
In the words of Stephan Tual, CCO of Ethereum, ” Ethereum is an open source platform to build, distribute next-generation decentralized applications.”
He further elaborates on this point by saying that these applications built on the blockchain of Ethereum are supposed to be free from the middleman business, i.e., the users can interact with social systems, financial systems, gaming interfaces, etc. in a peer to peer fashion.
You can transfer Ether from one account to another and use it to compensate the participants mining nodes for the computations that happen on the blockchain.
Ethereum employs a decentralized Turing-complete virtual machine known as the Ethereum Virtual Machine (EVM). Now the specialty of this feature is that it can execute scripts through an international network of public nodes. An internal transaction pricing mechanism that goes by the name of “Gas” is used for reducing spam and distributing resources on the network.
Vitalik Buterin, a cryptocurrency researcher and programmer in late 2013 decided to introduce Ethereum into the cryptocurrency market. Its development was funded through an online crowdsale that happened between July and August 2014. It finally went live on 30 July 2015, with a total of 11.9 million coins being premined for the crowdsale. 13 percent of the total circulating supply seems to be originating from this premining of Ether.
During the year 2016, Ethereum bifurcated into two different blockchains as a consequence of the collapse of The DAO project. The new version was named Ethereum (ETH), and the original plan carried on as Ethereum Classic (ETC). As a result, the value of the Ethereum currency shot up to over 13,000 percent in 2017.
I think so that should be a great bird’s eye view for you guys about What is Ethereum:
I.e., An open source platform to build and distribute decentralized applications where users can interact with their creations in a peer to peer fashion without the need of a middleman.
Who needs Ethereum
All developers who desire to build apps by leveraging the power of the Ethereum blockchain, users interested in accessing and interacting with smart contracts on the ethereum blockchain are the ones who need it. But wait there’s more. All the hodlers and anyone else interested in making a profit from this cryptocurrency and diversifying it into other types of cryptocurrencies are also hungry for ethereum.
Dapps and community:
Decentralized applications or dapps for short were first built on ethereum, and then Lisk modified this approach through its innovative blockchain. However, this is just my two cents regarding things here, and you guys are free to agree or disagree with it. A dapp is only an application serving a specific purpose like voting for someone or something or buying tickets just with the exception of no middleman fee or anything. This means you can get quality service without all the extra costs that banks, etc. charge. Awesome eh?
Now if you’re wondering about how to build a dapp, then I would an entire post for that so let’s just keep it for next time. Alright. Awesome. However, just some basics about dapp building many people may be knowing that you use the programming language Solidity to build dapps on ethereum. And you use ethereum tech to create new tokens on the ethereum platform.
So I believe that is enough regarding knowledge about dapps on the ethereum platform. We’ll have an in-depth look at them in another dedicated post. Okay, friends?
Now let’s transition our discussion about the ethereum community.
Regarding the community aspect of ethereum, you already know something about it if you read the introduction or if you’re a crypto enthusiast. However, if you don’t know much about it then let me reiterate what I have discussed in the introduction section of this post. Ethereum is an open source platform where you can build, distribute next-generation decentralized applications without any middleman intervention. So if you want to become a part of this community, you need to either create dapps and monetize them, or you could just buy ethereum at any cryptocurrency exchange. Then you will be a proud member of the ethereum community where people try to solve real-world problems using revolutionary blockchain technology. Welcome onboard is what Vitalik ( the founder of Ethereum ) would say if he would be personally greeting you.
If any of you would enjoy being a part of a forum for some discussion regarding a host of topics about ethereum like mining, pool discussion, education, etc. then here’s one forum I think you guys will enjoy.
ETH Consensus System
So ethereum is currently operating on a hybrid of proof of work and proof of stake basis. According to Wikipedia “Proof-of-stake (PoS) is a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. In PoS-based cryptocurrencies, the forger of the next block gets selected via various combinations of random selection and wealth or age (i.e., the stake). In contrast, the algorithm of proof-of-work (PoW) based cryptocurrencies (such as bitcoin) uses computationally intensive puzzles to validate transactions and create new blocks (i.e., mining)”. So this should give us a brief idea of how the mechanism of pow and pos algorithms work. And for further understanding of the consensus system and algorithm of ethereum, this is where you need to go.
As Vitalik Buterin, the 22-year-old prodigy or rather the mastermind behind Ethereum, explained it at a recent DC Blockchain Summit, within a smart contract approach, an asset or a currency is transferred into a program, “and then the program runs a certain code and at some point it automatically approves of a condition and then accordingly determines whether the asset should be going to one person or back to another person, or whether it should be refunded asap to the person who sent it in the first place or some combination thereof.” In the meantime, the decentralized ledger also stores and replicates the document which gives it certain security and immutability.
Now this, in a nutshell, means that smart contracts run on an if this then that basis, i.e., If X event happens then only, Y should happen. Otherwise, nothing should get triggered just like if you don’t touch the first piece of the domino then the other parts would also stand still and vice-versa.
For example:- This one is cliche, and you may have already seen a lot of youtube videos and read a lot of articles about this, but this is the simplest way, in my opinion, to learn about this concept of smart contracts with you guys. Moving on to the example that we are going to discuss. Have you guys seen a vending machine? Hopefully yes. And you might also be familiar to a great extent as to how it works. You put money into the vending machine then press a specific button to get your soda or chips, etc. and wait for your beverage or chips to fall and take away for consumption.
Now, did this analogy clarify some if not a lot of doubts regarding smart contracts?
If it did then awesome. Otherwise, if you guys are still confused about anything related to smart contracts, then please do bother me in the comments section below. I would love to talk to you.
Difference Between Bitcoin and Ethereum
Any crypto enthusiast would know that both Bitcoin and Ethereum are driven or instead are based on the principle of distributed ledgers and cryptography, For instance:- On the one hand, the programming language which ethereum utilizes is Turing complete. On the other hand, Bitcoin operates on a stack-based language. Specific other differences are as follows:
Bitcoin and ethereum are two separate blockchains having individual purposes. One functions to act as an alternative way people send and receive money throughout the world, and the other intends to solve real-world problems using the power of blockchain technology to enable developers to build, run and distribute decentralized applications (DApps) on a peer-to-peer basis via its currency vehicle.
Bitcoin takes a lot of time ( minutes or sometimes a lot of hours ) to confirm transactions. But ethereum, on the other hand, takes only 15 seconds to verify transactions.
(Ethereum uses that while Bitcoin uses secure hash algorithm, SHA-256).
The Bottom Line
All in all, Ethereum is an innovative approach to the blockchain technology that is leveraging the principle of blockchain that supports Bitcoin, however, with the intention is almost entirely different to Bitcoin. Nevertheless, the popularity and rising market capitalization Ether has received since it was inception in 2015, makes it a fierce competitor against all other cryptocurrencies, especially from a trading perspective. As of now, the market cap of Ether (ETH) is higher than Ripple and Litecoin, although it’s got a lot of distance to cover regarding overtaking Bitcoins position on the coinmarketcap. In conclusion, Bitcoin and Ethereum are two separate versions capitalizing on the blockchain technology and are driven by different motives set to establish themselves in the cryptocurrency world.
What is The Supply System of ETH
As per the terms consented by all parties involved on the 2014 presale, issuance of ether is capped at 18 million ether per year (this number equals 25% of the initial supply). Now what this means is that while the total issuance is fixed, the relative inflation is decreased every year. In theory, if this issuance was kept indefinitely then at some point the rate of new tokens created every year would reach the average amount lost yearly (by misuse, accidental key lost, the death of holders, etc.) and therefore would reach an equilibrium.
But the rate is not expected to be kept. Another case in point is that sometime in 2018-2019 Ethereum is supposed to be switching from its current POW, i.e., Proof of Work algorithm to a new consensus algorithm which is under development and is called Casper. This is expected to be more efficient and requires less mining subsidy. The exact method of issuance and it’s functionality is currently an area of active research. But for now, you can be assured of these two things.
(1) The current maximum is considered a ceiling and the new issuance under Casper shall not exceed it (and is expected to be even less).
(2) Whatever method gets selected ultimately for issuing will be based on a decentralized smart contract that will not give any biased treatment towards any particular group of people, and its purpose will be to benefit the overall health and security of the network.
For more information check out the whitepaper here.
What Problems Does Ethereum Solve
From my experience Ethereum is trying to solve real-world problems like problems in scalability in specific sectors, the problem of middleman, problem of trust in higher organizations regarding people’s funds, etc. through it’s dapps and it’s cryptocurrency.
You can check out more over here.
So this my short and sweet explanation of what I understood as in how can modern-day developers use ethereum and solve modern day problems.
Personalities Behind Ethereum
Founder: Vitalik Buterin.
Co-Founders: Dr. Gavin Wood, Joseph Lubin.
You can learn more about people behind Ethereum here.
Where to Store ETH Safely
Although the Ethereum team recommends using official clients like mist, I won’t touch them if I were a newbie to this cryptocurrency arena. It’s a little on the techy side of things, and you wouldn’t want to attempt it right out of the bat because you might get overwhelmed by the complexity of things and run away from cryptocurrencies for good. Not what I would want for you. So what I would recommend is Ledger Nano S or Trezor wallet. They’re a much more safe and convenient way to save your private info when it comes to cryptocurrencies.
So that’s it for this post on Ethereum. I hope you guys enjoyed my company as much as I did enjoy your company here. And more importantly, I wish to have either refreshed or educated you about this beautiful cryptocurrency called Ethereum. Once again thank you so so much for your presence here, and I shall be meeting you in my next post.Until then, please follow us on Facebook, Twitter & Instagram.
Latest posts by Amarbir Sandhu (see all)
- Different Types of Blockchain Consensus Mechanism Part-2 - May 17, 2018
- What is Dash (DASH): Everything A Beginner Needs to Know - March 5, 2018
- What is Zcash? A Bitcoin Based Private Centric Coin - March 3, 2018