What Is Ethereum?
Ethereum is the world’s second-largest crypto project by market capitalization and was the first to introduce smart contract functionality to the industry.Ethereum is a blockchain-based software platform that is primarily used to support the world’s second-largest cryptocurrency, after Bitcoin, in terms of market value. Ethereum, like other cryptocurrencies, may be used to transfer and receive value globally without the need for a third party to monitor or intervene.
The Ethereum blockchain’s major use case today is value exchange, which is commonly done using the blockchain’s native token, ether. However, many developers are working on Ethereum because of its long-term potential and the inventors’ lofty ambition of using the cryptocurrency to offer consumers more control over their wallets and internet data. The grandiose plan – which has led to Ethereum being dubbed the “global computer” – has been met with scepticism from some who believe it will fail. However, if this experiment goes as planned, it will result in apps that are significantly different from those created by Facebook and Google, which consumers deliberately or unintentionally trust with their data.
With the use of a blockchain, Ethereum supporters hope to return control to users. A blockchain is a technology that decentralises data and distributes copies to thousands of individuals all over the world. Developers can utilise Ethereum to create leaderless applications, which means that the service’s developers can’t interfere with a user’s data.
Ethereum was first proposed in 2013 by Vitalik Buterin, a 19-year-old developer who was one of the forerunners of the idea of using the blockchain technology that underpins Bitcoin for more than just transactions.
While Bitcoin’s inventors aimed to disrupt online banking and everyday transactions, Ethereum’s creators want to use the same technology to replace internet third parties, such as those who store data, transfer mortgages, and keep track of complex financial instruments. These apps help consumers in a variety of ways, such as making it easier to share vacation images on social media with pals. However, they have been accused of abusing this power by suppressing data or, in the case of cyberattacks, unwittingly spilling critical user data.
The platform went live in 2015, transforming the concept of Ethereum into a real-world network.
Ethereum and a decentralized internet
It’s helpful to first understand intermediaries before you can understand Ethereum.
Intermediaries are becoming commonplace. They assist us with a variety of digital duties behind the scenes. Gmail, for example, allows us to send emails. We can use Venmo to send $10 to a pal.
This implies that our personal information, financial information, and other sensitive information is mostly stored on other people’s computers — in clouds and servers owned by firms such as Facebook, Google, and PayPal. This CoinDesk article is also kept on a server that is managed by a third party.
According to proponents of decentralisation, this arrangement can be problematic. It means users have less direct power, and it also opens the door to censorship, since the intermediary can step in and prevent a user from doing any action, such as buying a specific stock or posting a specific message on social media, or even block them entirely.
Ethereum’s goal is to revolutionise the way programmes work on the internet by removing intermediaries and replacing them with smart contracts that implement rules automatically.
Many people, including the internet’s creators, think the internet was designed to be decentralised from the start, and a split movement has come up around employing new tools to help achieve this aim. One of the technologies that has joined this movement is Ethereum.
How is Ethereum different from Bitcoin?
Bitcoin is a source of inspiration for Ethereum. Both are digital currencies. Ethereum is based on the same blockchain technology as Bitcoin, which employs a shared, decentralised public ledger to decentralise the network and prevent it from being controlled by a single party.
However, while Bitcoin is generally used as a store of money, Ethereum’s goal is to decentralise a variety of applications and services, ranging from social media networks to more intricate financial transactions.
Many supporters consider Ethereum to be a “global computer” that has the potential to decentralise the internet.
Thousands of so-called “nodes” managed by volunteers all around the world replace centralised servers in Ethereum, constituting a “global computer.” It is hoped that everyone in the globe will be able to utilise it one day.
How does an Ethereum app work?
A typical app store will include a range of bright squares representing everything from banking to fitness to messaging apps when you scroll through it. The Ethereum community’s long-term goal is to create apps that seem similar to these yet perform differently under the hood.
In a nutshell, Ethereum apps aim to return control of data in these types of services to the owner.
Decentralized apps are those created on Ethereum that provide this feature. To utilise them, users must have ether, Ethereum’s native token.
It’s important to note that Ethereum has been met with a healthy amount of scepticism. For one thing, Ethereum isn’t scalable, which means it can’t now accommodate a large number of users, putting a crimp in the idea of a “global computer” that may destabilise Google, Facebook, and other centralised systems.
Ethereum 2.0, which went live on December 1, 2020, promises to address some of these problems. Other scaling technologies, such as Raiden, which has been in development for years, may also be able to help with the scalability issue.