Introducing… The Ethereum Blockchain
Welcome to the start of a new series dedicated to introducing and explaining todays Cryptocurrencies. This week… Ethereum.
New to cryptocurrency? Check out our starter guide to have your questions answered.
What is Ethereum and why is it different?
The Ethereum token, Eth, can be bought and exchanged just like most other forms of cryptocurrency. But while the world of cryptocurrency markets may seem swamped with nothing more than clones of Bitcoin, Ethereum is more than just another digital currency.
Ethereum is designed as a computer (Yes you read that right), Ethereum harnesses the power of the blockchain which relies on the decentralised processing power of the community to do its work.
This means that while Bitcoin uses this system to verify transactions as part of its digital currency, Ethereum also makes use of the platform to execute programs, turning what would be a simple ledger of financial transactions into a fully functioning data centre for the world.
What are smart contracts?
Smart contracts are the computer programs that are coded using a special language known as ‘Solidity’ that run on the blockchain. For example say ‘John’ wanted to make a bet with ‘Jack’ about the world cup, they might make a contract that looked something like this.
If France win the world cup in 2022 > Transfer 1.5 ETH from John to Jack
Which would execute if the condition was met, but if not, there may be a secondary condition such as
Else If Brazil win the world cup in 2022 > Transfer 1.5 ETH from Jack to John
This contract would then be stored in the blockchain, on thousands of computers around the world just waiting for the conditions to be met so the contract can be executed.
Ordinarily such deals may be difficult to enforce due to issues of trust and ensuring there is a clear record of the agreement. However, with Ethereum, the contract is truly secure (and cannot be tampered with), with a clear record of the agreement, further more it is fully enforcable as it will always be carried out once its condition is reached. This is just one example of the way an ethereum contract can be used.
What are DApps?
The main goal of Ethereum is to create a framework for the development of decentralised applications (known as DApps for short). These are essentially applications for people to use, that employ smart contracts on the back end, rather than a traditional centralised database structure.
For example, one of the most well known Ethereum DApps is called CryptoKitties. While it may appear to be a simple web-based game for breeding and collecting cats, behind the scenes, every purchase for a cat is being communicated across the blockchain.
One of the main advantages of such applications is their security. While traditional websites are vulnerable to hacking attempts upon their database, DApps have the advantage of being distributed across the network, so their is no centralised point for attack.
The future of Ethereum
This is the exciting bit, there are many possibilities for Ethereum, such as forging reliable and secure contracts for banks and businesses without the risk of untrustworthy third-parties, creating an improved digital economy with privacy and security at its core or just changing the world with cats.
How to buy Ethereum
If you’re fancying getting some ethereum yourself, either for speculation or to get actively involved. It is available from several online exchanges such as Cex.io where you can simply sign up for an account buy and sell the coin using fiat currency (e.g $, €,£) or even trade using Bitcoin.