What is Ethereum (ETH)?
Before understanding Ethereum lets go back and take a look on Bitcoin as it is where it was born.
By now you probably have known that Bitcoin is a form of decentralized money. Before Bitcoin was invented the only way to regulate the money was through the intermediary like bank and other financial institution which was monitored and controlled by these agencies.
However Bitcoin changed all that by creating a decentralized form of currency through which individual could trade directly without the need for intermediary. Each Bitcoin transaction is validated and confirmed by the entire Bitcoin network. Since the entire network is based on thousands of computer so manipulating or shutting down the system is practically impossible.
History of Ethereum (ETH)
Now imagine for a second that you wanted to build your own decentralized network at home, you need to understand how Bitcoin decentralization works, write code that mimics the same behavior, get a huge network of computers to work this and so on and that is a lot of work.
Enter, Ethereum:- Ethereum was first proposed in late 2013 and was brought live in 2014. Ethereum is a do it for yourself platform is known as a decentralized platform also known as DAPPS(Decentralized Applications). If you want to create a decentralized program that no single person controls not even you who wrote it.
Ethereum Programming: Solidity and Pegion
All you have to do is learn the Ethereum programs called Solidity and Pegion Coding. The Ethereum platform has thousands of independent computers running which means its fully decentralized.
Once a program is deployed to the Ethereum network, these computers also known as nodes will make sure if it executes as written. Ethereum is the infrastructure for writing dapps worldwide. It’s not a currency it’s a platform the currency used to incentivize the network is called Ether, But more on that later. Ethreum’s goal is to truly decentralize the internet, Wait.! The internet is centralized !!!
I thought the internet was already decentralized and anyone can start their own site. While in theory that might be true but in practice, Amazon, Facebook, Google and most of the other giants controls most of the WWW (World Wide Web).
There is no activity that happens on internet without the help of some sort of intermediary or third party. But once the concept of digital decentralization was demonstarated by Bitcoin, whole new level of opportunities became available. We can finally manage to design a program on internet that connects users directly without the need of any third party or intermediaries. Which means a driver a get connected to the passengers directly without the help of Uber or a person a buy or sell cryptocurrencies without the need of any exchange.
Ethereum connects people directly through a powerful decentralized super computers without the central authority to take care of things.
How does it work?
Ethereum’s coding language “Solidity” helps to write smart contracts that are the logics that run dapp. Let me explain, in real life all the contracts is a set of ifs and then meaning a set of conditions and of actions.
For example, if I pay my landlord $1500.00 on 1st of the month, then he lets me use my apartment. That’s exactly how smart contract works on Ethereum. Ethereum developers write the conditions for their programs or dapp, then the Ethereum network executes it. They are called Smart contracts because they deal with all of the aspects of the contracts.
Enforcement, Management, Performance, and Payment. For example, If I have a smart contract that used for paying rent, the landlord doesn’t need to actively collect the money. The contract itself knows if the money has been sent. If I indeed sent the money, then I will be able to open my apartment door. If I missed my payment I will be locked out.
However, smart contracts also have their downsides. Going back to my previous example, instead of having kicked out the renter that isn’t paying. A smart contract will lock the renter out of the apartment. A truly intelligent contract, on the other hand, will take into a note of other factors as well such as extenuating circumstances, the spirit with which the contract was written and it would also be allowed to make exceptions if warranted, in other words, it would really act as a good judge. Instead, a smart contract or the contracts of ethereum is not intelligent at all.
Its actually uncompromisingly letter strict, it follows a rule down to a teeth and can’t take any secondary considerations or the spirit of the law account. That commonly happens with real-world contracts. Once the smart contract is deployed under the Etherum network, it cannot be edited or corrected even though by its original author. Its Immutable, the only way to change this Ethereum contract would be the convince the entire ethereum network that a change should be made and that is virtually impossible. This creates a very serious problem, unlike bitcoin, Ethereum was with the ability to create really complex contracts and complex contracts are very difficult to secure.
With any contract, the more difficult the contract is the harder it is to enforce, as more room is left for interpretations or more clauses must be written to deal with contingency. With smart contracts, security means handling every possible way in which it could be made more secure.
In order to make sure, the contract does only what the author intended. Ethereum launched with the idea that ‘Code is Law’. That means, a contract on Ethereum is a complete authority, nobody could overrule the contract. The organization called The DAO was drained out of $150Millions as a hacker were able to figure out the loophole in the contract of The Dao. And that’s when the developers of Ethereum figured out to launch the Ethereum Classic the real Ethereum.
Ethereum as Currency
Till now we have talked a lot about the Ethereum and its network. Now, let’s look into the Ethereum as a currency. Ethereum is basically a large bunch of computers working together to one supercomputer to execute codes that power Dapps. However, this costs money. Money to get the machines, to power them up, to tore them and cool them if necessary. That’s why Ether was invented when people talk about the price of ethereum that actually are referring to Ether, the currency that incentivizes people to run the ethereum protocol on their computer. This is very similar to the Bitcoin miners getting paid to mine the Bitcoin Blockchain.
In order to deploy the smart contract of the ethereum platform, its author must pay to do so, the payment is made in the form of Ether. This is done that the people will write and optimize the efficient code and won’t waste the Ethereum network computing power on unnecessary tasks.
Ether was first distributed in Ethereum original coin offering back in 2014, back then it costs around $0.40 to buy one ether today one ether is valued in hundreds of dollars since the growth of the ethereum network has grown immensely due to the ICO hipe started in 2017.