Ethereum and Guide to Beginners
After hearing Ethereum, people usually say it’s the thing which is like Bitcoin. Well, it’s not entirely correct, Ethereum is that thing which studied Bitcoin Technology and expanded its Capabilities.
Before moving any further, you should know what Blockchain is and how it works?
Ethereum for beginners-
Simply Ethereum is an open source software platform that allows users to build and launch Decentralized Applications.
Is Ethereum like Bitcoin?
Well, we answered this question above which is not entirely similar, but we can say that in some aspect it is related. Bitcoin was only created solely for just one purpose only which is to make Digital Payments whereas Ethereum is not only used as a Digital payment it also provides a platform for decentralised applications.
When you mine Ethereum, you get Ether which is the fuel which runs Ethereum blockchain technology. Ether is also used by developers to pay the fees of smart contracts.
What is Smart Contract?
Before going in deep explanation let’s try to explain it to you using an example, suppose you wants to sell your house. This process is intimidating and complicated as the process involves a lot of paperwork, communication with many different firms and people with lot of risk factor.
To overcome this process sellers usually hire an estate agent. That agency does all the work that be filing of your paperwork or marking the price of your property they do all of it. Agency stays with you from the starting till the end until the property is sold. When the property is sold the agency get a percentage of share that may be from 5-8% which agency gets from both ends from seller and buyer. That amount is a substantial loss to buyer and seller.
Now smart contracts can really come handy in such cases and which exempt you from paying that extra percentage. Smart contract makes the work less burdened and create a trust between both party as it uses escrow service.
In technical terms we can say-
Smart contracts are the sets of rules, regulations and penalties for an agreement. They are similar to the traditional contracts, but the only difference is that they automatically enforce the rules and obligations once the contract is executed.
What is Ether? Is it a Cryptocurrency?
Ether doesn’t require a third party to process the payment as it is a digital bearer asset. However, it doesn’t only operate as a digital currency, it also acts as ‘fuel’ for the decentralized apps within the network. If a user wants to change something in one of the apps within Ethereum, they need to pay a transaction fee so that the network can process the change.
The transaction fees are automatically calculated based on how much ‘gas’ an action requires. The amount of required fuel is calculated based on how much computing power is necessary and how long it will take to run.
Who created Ethereum?
Ethereum was created by Vitalik Buterin in late 2013. He Described all his idea on whitepapers and sent it to his friends, who in returned passed it further. As a result, more than 30 people reached out to Vitalik Buterin to describe them the idea. He wanted people to figure out his mistakes or concept which wasn’t included, but it never happened.
In January 2014 the project was publicly announced, with core members consisting of Vitalik Buterin, Anthony Di Iorio, Mihai Alisie, Charles Hoskinson, Gavin Wood and Joe Lubin.
What can Ethereum be used for?
Ethereum is mostly used by developers. They use Ethereum platform to build and deploy Dapp or decentralized apps. The biggest example of Dapp is Bitcoin which enables users online for peer to peer electronic payments. These decentralized apps run on blockchain platform which are not controlled by any central organization or government. That’s what decentralized means.
Centralized services can be turned decentralized using Ethereum. From bank loans to voting systems, many platforms can be decentralized using Ethereum’s smart contracts which are written on Ethereum blockchain.
One of the examples of Ethereum based app is Mist Browser which provides digital wallet to store and trade Ethereum. Mist also allows you to access the whole new world of decentralized blockchain apps.
Another example is MetaMask browser extension which when installed in chrome browser turns it into Ethereum browser.
People don’t need to have any technical background to build blockchain apps.
It is also used to build DAO Decentralized autonomous organizations.
How Ethereum works?
To study working of Ethereum first of all you must know about blockchain because without blockchain Ethereum would be of no use. To know about Blockchain click here…
Now that you know all about blockchain technology it would get easy for you to understand Ethereum. Ethereum blockchain is complex but the world’s most evolved platform ever recognized.
Blockchain of Ethereum is similar to that of Bitcoin’s but it differs in many ways like Bitcoin blockchain is only used for payments while Ethereum blockchain stores detail of every smart contract along with ether transactions.
Powered by blockchain technology, Ethereum is the secure backbone for the ecommerce to the IoT enabling transparent governance for businesses and communities while keeping communications secure. It is also known to be the world’s first zero infrastructure platform.
You don’t want to store data directly in the blockchain because it’s too big. Every miner would have to download a copy of this blockchain, so no one is going to be able to download all these big copies of blockchains. In this Ethereum blockchain you have blocks which are linked together all these blocks contain list of all transactions and contracts. Eth blockchain stored on every miner’s computer uses POW algorithm to verify the entire network and run the computation that smart contract contained in each block. The whole network does the same thing and the networks do what majority of nodes together agree to the change.
Ethereum Virtual Machine
EVM or the Ethereum virtual machine can read and execute the smart contracts that are written in programming languages which are compiled into Bytecode.
This contract is executed by nodes using EVMs. These nodes hold a copy of smart contract and the transactions which are updated regularly. Every node compiles and executes the same code.
Now the question arises if it is the expensive than normal computation? Yes, ofcourse it is and that’s the reason that this network is used only for some special use cases.
Advantages of Ethereum
Ethereum platform has all those properties of the Blockchain technology that it functions on. Third party interventions can’t be seen here as it is completely immune to those, which means it can’t be controlled by anyone at all which includes Decentralised apps and DAOs deployment within the network.
It is far away from corruption and frauds which makes the network tamper-proof as all Blockchain network are formed on one principle which is it requires majority of opinions meaning when a change is made within it then all the nodes within the system need to agree on that.
There is no possible single point failure as the whole platform is Decentralised. That means all the apps which always stay alive(online) and never switch off.
This all makes Ethereum network protected from almost all the hacking attacks and all Fraudulent activities.
Disadvantages of Ethereum
History has witness that where there is a good bad comes along, same happened with Ethereum network. Decentralised apps are not faultless as smart contract code is written by humans, so smart contracts are as good as the people who write them. Any mistake in code might get exploited as there is always room for Human errors. If this happens there is no direct way to stop a hacker attack or an exploitation of said mistake which is hard as they would have to rewrite underlying code by reaching the consensus.
In 2016 there has been an attack since Ethereum network is launched which was on ‘DAO’ (Decentralised Autonomous Organisation). In that attack more than 3.6 Million Ether were stolen. This all happened because the hacker exploited a human error which was a ‘Recursive call bug’, which drained the funds from DAO into a ‘child DAO’ having similar structure as DAO. This attack shock Ether users and price of Ether fall from $20 to $13.
What apps are or were developed on Ethereum platform?
Ethereum platform has the potential to open the gate of Decentralised apps for people who doesn’t have any technical background. When such thing will happen, it will be adopted in mass which will revolutionaries the Blockchain technology across the globe.
Ethereum platform is being used to create a broad range of apps in different industries. At this point it is hard to tell which app will succeed and which ones will be failed. We have created a list of few apps-
- uPort– It returns ownership of identity to the individual. uPort’s open identity system allows users to register their own identity on Ethereum, send and request credentials, sign transactions, and securely manage keys & data.
- Gnosis– It is a prediction market platform that enables user to vote on anything.
- Alice– This platform aims to bring transparency to social funding and charity via Blockchain technology.
- Ethertweet– The service provides basic Twitter-like functionality to tweet messages of up to 160 characters. The system is censorship resistant in the sense that once a message is published, it can only be removed by the publisher.
- Provenance– It is a platform that empowers brands to take steps toward greater transparency by tracing the origins and histories of products. With their technology, you can easily gather and verify stories, keep them connected to physical things and embed them anywhere online.
- Augur-A prediction market protocol owned and operated by the people that use it which is similar to Gnosis, but in Augur if the prediction is correct you get rewarded.
- Weifund– It is an open platform for crowdfunding campaigns. You can launch a campaign using one of WeiFund’s contract templates or integrate your own smart contracts.
- Bitnation– The World’s First Virtual Nation, a Blockchain jurisdiction. It contains many of the same functions as a traditional nation, such as insurance, education, ID cards, diplomacy programmes, including ones for ambassadors and for refugees and many many more.
- Ethlance– A freelance platform to exchange work for Ether rather than any other currencies.
If you want to check more Decentralised apps visit the State of the dApps website.
How to get Ether?
You can obtain Ether in 2 ways-
This method is most common and easy than the other one as you just need to find an apt exchange for buying. Exchanges which deal in Bitcoin are same which deal in Ethereum so to know about exchanges click here. After you found an apt exchange which is within your jurisdiction, set up an account and transfer funds using any mode of payment using your bank account. Funds transferred now what to do next? Buy Ether from that exchange using your funds and they get stored in that exchange or if you need to store those Ether in any other wallet you can transfer them there using your Ether address.
Another way of buying Ether is peer to peer trading that means if you have Bitcoin then you can buy ether from those Bitcoin from an exchange.
This is another method and a little bit complicated for first timers. Ethereum mining uses proof-of-work which means that the miners must contribute their computing power to solve a complicated mathematical problem and confirm a block of action within the network. When the task is successfully completed miners are rewarded in Ether for every block they mined. To know more about mining click here….
We tried to cover all the topics through our blog. If we left anything do let us know in comment section…………………