Ethereum with its second largest Cryptocurrency market cap has been a subject to a lot of hype. It is seen by some as the new Internet, a Web 3.0. Its critics call it a platform that gives rise to scammers and Ponzi schemes. In order to fully understand Ethereum, we need to delve deep into core concepts. This article briefly explains what Ethereum is and how it can potentially impact our society.
Before we begin, we must backtrack to what blockchain technology is. A Blockchain could be seen as a distributed database maintained by a network of nodes across the world. Data is stored in the form of blocks which are time stamped with each other to form a chain. The data stored here is secure and immutable. The blockchain also follows a consensus mechanism removing the need for third-party auditing. It enables us to transfer value across the Internet without middlemen. This revolutionizes the way Internet works.
What is Ethereum?
Ethereum is a programmable blockchain. The blockchain runs on a network of computers worldwide based on a peer-to-peer network protocol. But it differs from the Bitcoin with the wide range of functionalities it offers. While Bitcoin provides a few predefined functions like bitcoin transactions, Ethereum lets you run your own code on top of its blockchain.
The nodes in the Ethereum run and maintain the network. These nodes (computers) run Ethereum Virtual Machine(EVM). This lets the network combine the computing resources shared by all the nodes.
Who is behind Ethereum?
Vitalik Buterin is the man behind Ethereum. He put forward this concept in 2013 in a white paper. After vetting by his peers, the project was publicly announced in 2014. Within a few months, they held a crowdsale to raise money for the project.
Last year, The Enterprise Ethereum Alliance (EEA) the world’s largest open source blockchain initiative was established. This alliance connects Startups, Academics, Industry Experts and Fortune 500 companies to a common goal of making Ethereum enterprise ready. Notable members include JP Morgan, Microsoft, Intel, Mastercard and HP Enterprise to name a few. EEA is a sign that blockchain technology is here to stay and not just a fad like some believe it to be.
Ethereum Virtual Machine
Ethereum allows its users run their own code. This is possible with the help of Ethereum Virtual Machine (EVM). As Ethereum’s runtime environment, the EVM executes smart contracts. Every node on Ethereum runs EVM, letting it reap the benefits of being decentralized without having their own blockchain.
A Smart Contract is a self-executing piece of code. It perfectly defines a series of relations, parameters, and actions. The Smart Contracts are written in Solidity, an Ethereum specific scripting language. Once coded and uploaded, these contracts run as intended because the blockchain is immutable. They could be used for a wide range of applications. This could be derivatives, futures, options, simple consumer transactions, IOT data exchange, etc.
Decentralized Apps (DApps) function as normal apps but are also decentralized. They run on a network of nodes, instead of a single central server like a normal app. This gives a lot of advantages like
Autonomous – Dapps automatically act by the rules encoded into them.
Secure – Data and protocols are stored on the blockchain cryptographically.
100% Uptime – The blockchain is always running, meaning zero downtime for dapps.
Decentralized Autonomous Organizations
Decentralized Autonomous Organization (DAO) is an organization that is completely governed and managed by the rules encoded in smart contracts. A DAO could be seen as a DApp where the developers have no control over once coded and uploaded on the blockchain. They differ primarily on governance and autonomy. What the organization does and what it will do is all previously determined in its code. In fact, the code is the organization itself.
Ethereum Use Cases
Ethereum has an impact that’s far more widespread than Bitcoin. All intermediary trust providers on Internet could be replaced by code. The Internet ushered in a new age of information sharing. With Ethereum, trustless sharing of value over the Internet would be possible. This is why Ethereum technology is referred as the driving force behind the ‘Internet of Value’ or the Web 3.0.
Essentially, the Ethereum can bring its core principles – trust, transparency, security and efficiency in any industry.
Ethereum can also be used to create Decentralized Autonomous Organizations (DAO), which operate completely transparently and independently of any intervention, with no single leader. DAOs are run by programming code and a collection of smart contracts written on the Blockchain.
Ethereum Vs Bitcoin
Though they have different use cases, Ethereum provides quite a few benefits over Bitcoin such as
Shorter Block Times – On Ethereum, blocks are mined roughly every 15 seconds compared to Bitcoin’s 10-minute rate.
Organized Fee Structure – Ethereum transaction fees are based off storage and network usage and aren’t limited by block size.
However, Bitcoin does have a relatively more stable price—and so functions as a better value storage option—from a trading perspective.
Ethereum is a disruptive technology which has the potential to revolutionize industries across various verticals. They provide efficient, fast, secure, reliable and auditable transacting of values. They challenge how we have structure society, define value and reward participation. Almost everything can be coded and run on Ethereum, making it the base of Web 3.0. The Ethereum community is focused on building a tangible future for the project. There are, however, many old-school financial experts who despite the success of Ethereum predict its impending downfall. Ethereum, either way, has ignited a revolution changing the way business work on the Internet.