Ethereum: Where Programming Logic meets Finance
Everyone has heard of bitcoin. Its name has become synonymous with crypto assets ( yes assets, not currency ), and often beginners will refer to both interchangeably. Yet the fact remains that Bitcoin provides little to no functionality in terms of custom programming logic that can be implemented on top of the Bitcoin blockchain.
Enter Ethereum. It was proposed in 2013 by Vitalik Buterin. In 2014, development was crowdfunded and the network went live with an initial supply of 72 million coins on July 30, 2015 . Ethereum is a decentralized, open source blockchain with smart contract functionality. If that definition just went over your head, read on because that is what this intro blog is about: breaking down that definition.
What is a blockchain?
A blockchain is a computer that anyone can upload programs to and leave them to self-execute, where the current and previous states of every program is publicly visible, and which has a strong crypto economic guarantee that the programs uploaded will continue to run adhering to the blockchain protocols
All the devices running Ethereum nodes ( more on this in another blog ) are basically functioning collectively as one big globally distributed Ethereum computer . The blockchain is also an immutable record of all changes/transactions that have taken place on the network all the way back to Block #0, or the Genesis Block . Imagine it in this way: suppose a hypothetical public bank built on an open source blockchain . You could see all the monetary transactions of the bank all the way back to its inception (the recipient addresses are obviously anonymized, so no privacy risk). It is an unprecedented form of public transparency and accountability, all on an immutable record.
The native currency of the Ethereum blockchain is ether(ETH).
Decentralized and Open Source
This simply means that Ethereum runs on all the devices connected to the network. There is no single point of failure. All the code is openly available to anyone who wants to see it/experiment with it at https://github.com/ethereum .
This is where Ethereum extends Bitcoin’s functionality, and where the true power of the network lies. Bitcoin tries to complete all pending transactions as fast as possible. Smart contracts on Ethereum allow us to program certain
conditional logic, and only when the conditions are met will the ether locked in the contract be paid. This opens up a whole new world of decentralized apps ( Dapps, as they are called ) where code is the law. Smart contracts once deployed on the blockchain cannot be changed by anyone, even the original writer. All this without the need of any intermediary to establish trust. These systems are hence said to work in “trustless” environments, in the sense that the protection is offered by unbreakable mathematics, and not error prone human intermediaries.
This was obviously just a very basic introduction so that you have some idea of what Ethereum does ( and that it’s not some fraud as many naysayers suggest) . I hope to expand on this intro and deep dive into Ethereum ( and maybe crypto trading ) in future blog posts.