What is Ethereum?
Ethereum (ETH) is a technology that builds on blockchain technology to create and distribute smart contracts and decentralized applications. Ethereum is also the name of the network that uses this technology, and ETH is the cryptocurrency that is used to pay for certain activities on the Ethereum network.
A smart contract is a self-exyecuting agreement that is triggered by predetermined conditions. For example, a smart contract can automatically transfer money to a seller when a buyer has received an item. A smart contract can also control the logic and function of a decentralized application, which is a program that runs on the Ethereum network without needing any central server or authority.
Ethereum differs from Bitcoin and other cryptocurrencies by being more flexible and programmable. It can be used to build various types of applications and services that leverage the benefits of blockchain technology, such as transparency, security, efficiency and innovation. Ethereum is sometimes called a “decentralized Internet” or a “decentralized app store”.
What are smart contracts?
Smart contracts are self-executing agreements that are triggered by predetermined conditions. They are programmed using a special language called Solidity, and they are stored and run on the Ethereum network. Smart contracts can interact with each other and with other decentralized applications on Ethereum.
Smart contracts have many advantages compared to traditional contracts, such as:
- Automation: Smart contracts execute themselves without needing any human intervention or intermediary. This reduces the costs and time required to execute agreements.
- Security: They are encrypted and immutable, which means that smart contracts cannot be manipulated or broken by any party. They are also transparent and verifiable, which means that anyone can see what they contain and how they work.
- Efficiency: Smart contracts can handle complex logic and functions that are not possible or practical with traditional contracts. They can also be integrated with other systems and data sources to create more value and innovation.
What are decentralized applications?
Decentralized applications, or dapps, are programs that run on the Ethereum network without needing any central server or authority. Dapps use smart contracts to control their logic and function, and they can interact with each other and with users through an interface.
Dapps have many advantages compared to traditional applications, such as:
- Censorship resistance: Dapps cannot be shut down or controlled by any party, because they run on a distributed network of computers. They are also immune to hacker attacks or system failures that can affect centralized servers.
- Openness: Dapps are open and accessible to anyone who wants to use them or contribute to them. They are also transparent and verifiable, which means that anyone can see how they work and what they do.
- Innovation: Dapps can create new opportunities and solutions that are not possible or practical with traditional applications. They can also benefit from other dapps and data sources to create more value and utility for users.
Who or what founded Ethereum?
Ethereum was founded by Vitalik Buterin in 2013. He is a Russian-Canadian programmer who also co-founded Bitcoin Magazine. Vitalik Buterin described the idea of Ethereum in a white paper that he published online. He wanted to create a platform that could use blockchain technology to create smart contracts and decentralized applications.
Vitalik Buterin was not alone in creating Ethereum. He had help from seven other developers from different parts of the world. They were Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, Amir Chetrit, Joseph Lubin, Gavin Wood and Jeffrey Wilcke. They met for the first time in Zug in Switzerland on June 7, 2014 to launch the Ethereum project.
The Ethereum project was funded by a public fundraising round called an initial coin offering (ICO). This meant that they sold units of the cryptocurrency ETH to investors in exchange for other cryptocurrencies like Bitcoin. They managed to raise about 16 million US dollars between July and August 2014.
Advantages and disadvantages of Ethereum
Ethereum has both advantages and disadvantages compared to other cryptocurrencies and platforms. Here is a bullet list of some of them:
- Innovation: Ethereum is a flexible and programmable platform that can be used to build various types of applications and services that leverage the benefits of blockchain technology, such as transparency, security, efficiency and autonomy.
- Openness: It is an open and accessible platform for anyone who wants to use it or contribute to it. Ethereum is also transparent and verifiable, which means that anyone can see how it works and what it does.
- Scalability: Ethereum has recently switched from proof-of-work to proof-of-stake as consensus mechanism, which means that it uses less energy and can handle more transactions per second. In addition, it also has other solutions that aim to increase scalability and speed on the network.
Risks and disadvantages
- Complexity: Ethereum is a complex platform that requires knowledge and experience to use or develop on. It also has many platforms and applications that can compete for block space and resources on the network.
- Regulation: The platform is not regulated by any central authority or organization, which can be both an advantage and a disadvantage. On the one hand, it gives users freedom and autonomy over their data and money. On the other hand, it also means that there is less protection and legal certainty for users. There is also uncertainty about how different laws and regulations will apply to Ethereum and cryptocurrencies in different countries and regions.
- Volatility: Ethereum is a volatile cryptocurrency that can fluctuate sharply in price in a short time. This can depend on various factors, such as supply and demand, market sentiment, technical issues, hackers, rumors or news. Therefore, Ethereum is a risky investment that requires caution and research.