The world we are living in is going to be dramatically changed in the next few years or decades with the arrival of digital currencies like Bitcoin or Ethereum powered by Blockchain technologies.
You may have heard it so many times “Bitcoin”, “Ethereum”, “Blockchain”, but what in the World is Ethereum for example, and how is it different from Bitcoin?
Can Ethereum be as revolutionary as Bitcoin? Could it really change the world as we understand it?
Bitcoin is the cornerstone where Ethereum was born. Chances are you likely know you’ve heard of Bitcoin as the digital cash.
What is Really Ethereum? Bitcoin vs Ethereum Explained
What is Bitcoin?
Bitcoin is literally digital money. It uses a platform called blockchain that allows standard peer-to-peer transfers of digital cash. If you want to pay me 3 BTC (Bitcoins) to create a website for you, without using a central authority like a bank, you can utilize Bitcoin.
You send me 3 BTC (Bitcoin), I create your website.
There is a cap on how many Bitcoin can exist (21 million), so it could become a reliable store of value, like gold or diamonds.
The average time for a confirmed Bitcoin transaction is, although they can be as quick as 10 minutes.
Before Bitcoin was invented, the only way to use money sensibly was via an Intermediary just like a bank or Paypal. Before that, the cash used was a government-issued and controlled money.
Bitcoin changed everything by producing a Decentralized kind of money that people could trade right without the requirement for an intermediary.
Each Bitcoin trade is supported by the total Bitcoin network. There is virtually no single point of collapse, so the machine is practically impossible to shut down, either control or manipulate.
Why do we Need a Decentralized System?
What purposes of the society are Centralized today that will be better served on a decentralized system?
Example: Voting takes a fundamental capacity to count and confirm votes. Real estate transfer documents use Centralized property enrollment authorities.
Even social networks such as Instagram or Facebook are established on centralized dedicated servers which control each of the information we upload to them.
Imagine if we can use the technology supporting Bitcoin, more popularly called Blockchain to decentralize different things too, like creating apps that allow us to do whatever we want without a central authority like Amazon AWS.
The intriguing thing about Blockchain technologies is that it is the by-product of this Bitcoin invention.
Blockchain technology was Made by fusing Already existing technology such as cryptography evidence of work and decentralized Network architecture collectively so as to make a system that may reach Decisions with no central authority.
There was no such thing as”blockchain tech” Before Bitcoin was devised.
But after Bitcoin became a fact, folks began discovering how it functions and termed it “blockchain technology“.
Blockchain is to Bitcoin exactly what the World Wide Web would be to Email, a platform in addition to which you are able to build programs and applications, just some companies are built on top of Facebook or Amazon AWS.
A currency like Bitcoin is one of the things created on the Blockchain that does not need a central authority or 3rd party to function. This got people really excited and they started to explore: well, what else can we decentralize?
Why Was Ethereum Built?
In order to get a method to be genuinely decentralized, it requires a huge network of computers to conduct it. Back then, the only system that existed was Bitcoin also it was fairly limited.
Bitcoin is composed in what’s Called a “turing Incomplete” terminology, making it know only a little set of orders such as Who sent just how much money to whom.
If You Would like to create a more Intricate system, You are going to require a different programming language, meaning another network of computers.
Imagine for a moment, you desire to build your own currency or company, you would have to understand just how Bitcoin’s decentralization works, then write the code which mimics exactly the identical behavior and get a massive network of servers to conduct this code, etc.
And that’s a great deal of work. That is why Ethereum was created.
Who is the Founder of Ethereum?
Ethereum was first suggested in late 2013 after which Brought to life in 2014 by Vitalik Buterin, who at the time was that the co-founder of Bitcoin Magazine.
He created Ethereum after realizing that the suggestions made to improve Bitcoin technology were not implemented.
What is Ethereum?
It is the second-largest cryptocurrency. Ethereum is the Do-it-yourself platform for Decentralized applications, also referred to as Dapps or decentralized Apps.
If You Would like to create a decentralized application that literally No single individual or corporation controls, not even you, despite the fact that you wrote everything, all you’ve got to do is learn the Ethereum programming language named Solidity and start coding.
The Ethereum system has a huge number of separate Computers operating it, meaning it is fully decentralized.
After a program is set up to the Ethereum Network, these machines, also called nodes, will ensure it implements as written. Ethereum is your infrastructure for conducting programs worldwide.
It is not a currency like Bitcoin, it is a whole platform like Amazon AWS allowing to build things on top of it. The difference with Amazon AWS, it is “Decentralized”.
The Money used to incentivize the system is named Ether. Ethereum’s goal would be to really decentralize the Internet.
The web right now is centralized, but most people don’t think that way.
Yes, the World Wide Web was centralized. When you want to create your website, what do you use? Bluehost, GoDaddy as host, which is a 3rd party.
Amazon, Google, Facebook, Netflix, and other companies control the majority of the internet because you need them for virtually anything you want to build.
There is, almost no action online, that occurs without some type of intermediary or 3rd party.
But when the Idea of electronic decentralization was shown by Bitcoin that a completely different collection of opportunities available. We can finally begin to envision and design a Web that connects consumers (you and me) directly without needing a centralized 3rd element like a Bank or Amazon.
Folks can “lease” money to other individuals without the need of Citibank or rent computer space to another person and make Dropbox outdated.
Drivers can provide their services directly to Passengers and eliminate “Lift”, which the 3rd party.
You Can Purchase cryptocurrencies straight from a person without needing a connector that may get hacked.
Ethereum enables people to connect right with each other with no central authority to look after things. It is, a system of computers that collectively combine into a strong, decentralized, supercomputer.
How Does Ethereum do it?
Ethereum’s programming language “Solidity” is utilized to Compose what we call “Smart Contracts”, which’s the logic that runs Dapps.
Contracts in reality are a collections of”Ifs” and “Thens”.
Example 1: If I pay you $10, then you send me the Pizza.
Example 2: If I pay my landlord $1500 on the 1st of this month, she then lets me utilize my flat, otherwise no contract.
That is precisely how smart contracts operate on Ethereum. Ethereum programmers (which can be your landlord or ANYONE) write the requirements for their Application or Dapp, and the Ethereum network implements it.
They’re called Smart contracts because they work together with each of the facets of the contract authorities direction, functionality and payment.
For Instance, If I have a Smart contract that is used for paying the lease, the landlord does not have to physically collect the cash.
The contract itself, “understands” if the cash was sent via a “consensus algorithm”.
The if-then is this: If I sent the cash on the 1st of the month, then I’ll have the ability to open my apartment door. otherwise, I’ll be locked out.
What Are the Limits of Smart Contracts?
Smart contracts also have their drawbacks. Instead of having to kick out a tenant that is not paying, in real life, we understand there may be circumstances, and the landlord may bring in feelings and tolerate you to pay on the 5th instead.
A Really smart contract, on the other hand, would have to be a really great judge and take that into consideration too and understand that it may be able to make exceptions when justified.
But no, a”smart contract” from the context of Ethereum doesn’t bring in feelings: it is really uncompromisingly lettered rigorous.
It follows the principles down to some T and can not take any secondary factors like feelings, just like what Commonly occurs with real-world contracts.
Note: After a Smart contract is set up on the Ethereum Network, it cannot be corrected or edited even by its creator. You don’t own it anymore. It is unchangeable.
The only way to alter this contract is to convince the total Ethereum network a change needs to be made and that is virtually impossible.
This creates a very serious problem because unlike Bitcoin Ethereum was assembled using the ability to create very complicated contracts and intricate contracts are extremely tough to secure.
The contract does just what the writer intended, no contingencies.
More About Ethereum 2.0
Ethereum started with the idea that “code is law”. That’s a contract on Ethereum, is your ultimate authority and nobody can overrule the contract, not even the state.
Well, that came to a crashing halt when the DAO event occurred.
“Dow” or DAO, stands for “Decentralized Autonomous Organization”, which enabled users to Deposit cash and receive returns dependent on the investments the DAO made.
The choices themselves are Crowd-Sourced and decentralized. The DAO raised $150M in Ethereum money called “ether” when ether was trading about $20.
While this all seemed really good, the code was not Secured nicely and led to a person figuring out a plan to empty the DAO cash.
The “hacker” was using the loopholes he discovered from the DAO’s intelligent contract.
What occurred next is that the Ethereum community determined that code no more is that the law and altered the Ethereum rules to be able to revert all of the cash that went to the DAO.
To Put It Differently, the arrangement, authors, and Investors did something dumb and the Ethereum programmers decided to protect them.
What About the Currency Ether?
Ethereum is a massive group of computers working together such as a single supercomputer, to execute code that forces Dapps.
But, this costs money to Find the machines to power up them, store them and run them.
That is why Ether, the currency was invented. When Folks discuss the Purchase Price of Ethereum, they are talking about Ether the money that incentivizes people to use the Ethereum protocol in their own PC.
This Is Quite like how Bitcoin miners get paid for keeping up the Bitcoin blockchain. In order to deploy a Smart contract into the Ethereum platform, its writer must pay to achieve that. This payment is made using the currency ether.
The idea behind the currency is so that Individuals will write optimized and effective code and will not waste resources.
Ether was distributed in Ethereum’s first First Coin, Offering back in 2014.
It cost approximately 40 cents to purchase one Ether.
Now, 1 Ether is more than $1,500, because the usage of this Ethereum system has increased tremendously because of the ICO hype that began in 2017.
What is Ethereum Storage?
Ether isn’t physically stored anywhere. If you purchase Ether coins, you need to store it somewhere safe. Here are the different wallets that exist:
- Hardware wallets: physical storage devices, similar to USB sticks. The Ledger Nano is an expensive hardware wallet, and it provides safe offline key storage. If you lose it, you lost your coins.
- Desktop Wallets: They allow you to store your public and private keys right on your computer or laptop. An Example is the Exodus desktop wallet.
- Mobile Wallets: You use them to store your public and private keys on your smartphone using an app. An Example is Jaxx.
- Web Wallets: although less safe, they allow you to store your private keys online. An example is Uphold or Binance.
- Paper Wallets: they are just bits of paper where you write your access codes. They can’t be hacked, but you need to memorize where you put them. Many lost their Bitcoins using this method.
Will Ethereum Overtake Bitcoin?
That is a question people ask a lot. Here is a video from a popular YouTuber showing the real value of Ethereum and why it’s “maybe” on its way to overtake Bitcoin. Enjoy!
Hopefully, by now You’ve Got a much better understanding of what Ethereum is a system of computers working together to replace the Centralized version of companies and programs which run the internet today.
Many dApps are being built on Ethereum’s blockchain technology and a sort of fundraising called an ICO is being utilized to pay for them.
Our world is about to get shaken up heavily. The future is digital, so take action now, make your moves, and invest in Ethereum now using platforms like Coinbase, Uphold, Binance, Robinhood or WeBull; then if you want, you can transfer your coins on your private wallet.
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