WHAT IS ETHEREUM? AND WHAT ARE ITS USES?
According to market capitalization, Ethereum is the second-largest cryptocurrency project in the world and was the first to offer smart contract capability to the market. Developers may build cryptocurrencies and other types of digital apps using the open-source software platform known as Ethereum. The word Ethereum is also used to refer to the digital money Ether.
Buterin, a co-founder of Bitcoin Magazine, presented a white paper outlining his ideas for how he thought bitcoin should be improved in 2013. For instance, he believed that bitcoin should be accessible to outside developers who might build decentralized apps that could be used with bitcoin. As a result of his proposal’s lack of success, he started developing his own platform where he intended to carry out activities other than cryptocurrency trading. Using a crowdsourcing effort that saw the sale of ether tokens valued over $18 million, Ethereum raised money for its project in 2014. Ethereum was introduced in 2015, with its genesis block being created on July 30.
Blockchain technology is used by Ethereum. Blockchain technology is a way to link (or chain) together blocks of digital data stored on a number of computers using the principles of cryptography. A comprehensive record of every transaction is stored on each computer. As a result, even if one computer fails, the system will still function. Thousands of computers are often engaged. A blockchain network is a decentralized system since it has no central authority regulating it. The network’s records are accessible to the general public since open recordkeeping is essential to building public trust in the system. To prevent records from being falsified or changed, blockchain technology employs cryptographic concepts. Every new transaction goes through a comprehensive mathematical verification process. Theoretically, in order to maliciously change a record, one would need to make the desired changes to every instance of the record on each machine connected to the network worldwide.
The technology is only used by Bitcoin for the production and exchange of its virtual money. Ethereum, on the other hand, leverages blockchain technology for much more than just bitcoin transactions. The platform is accessible to outside developers to build their own blockchain apps, in line with the goals of Ethereum’s co-founder Buterin. This system is sometimes referred to as the Ethereum Virtual Machine by developers. Ethereum functions through the usage of smart contracts. A smart contract is a piece of computer code that defines the rules of a contract and then ensures that the parties to the contract carry them out in accordance with those rules.
With the use of blockchain technology, two parties may start and complete a smart contract between themselves without the need for a conventional middleman. Since smart contracts are clear and irrevocable, one party cannot thereafter change the terms of the agreement to their advantage. Contracts are often thought of in a legal sense. Although they frequently do not, smart contracts can involve legal issues. Simply said, they are lines of code that carry out a function. A smart contract is a particular kind of business software, if you will. Smart contracts are made by developers to power their programs. Decentralized apps, or dApps, are what these programs are known as since they operate on a distributed network. Despite its name, smart contracts can only work as well as the computer code that forms their foundation. They lack all artificial intelligence of any kind. Even if the code’s author makes a mistake, the smart contract will nonetheless carry out all of its instructions precisely. The outcome might range from something modest like a minor hiccup to something severe like a security hole that welcomes hackers and fraudsters.
Traditional business software often only works inside the boundaries of a single organization and is in charge of carrying out certain operations. On the other hand, smart contracts are possible because of blockchain technology and can involve any number of participants located anywhere in the globe. However, the real smart contract is stored on the server of the person who created it and is not sent around the network to all the machines. The Ethereum blockchain is open for use in the creation of smart contracts by other developers. A new digital asset called a token, which may be used as virtual money in conjunction with the program, can be created by the smart contract. The Ethereum blockchain, which also holds its native currency, ether, accommodates an infinite number of digital currencies in addition to bitcoin, unlike the bitcoin blockchain, which is only home to bitcoin. The freshly established smart contract controls the token’s transactions as well as producing the new token. Frequently, the newly issued token may be acquired by the general public by paying for it with ether during the new token’s ICO (ICO).
Independent developers producing smart contracts and releasing their own coins quickly became a concern. Each token required a distinct method of communication from the network. Ethereum created the ERC20 community standard for new coins to address the issue. Tokens must fulfill six characteristics in order to be classified as ERC20 tokens, according to ERC20. It became so simple to manufacture tokens because of this standardization, and now there are services that can do it for you in a matter of minutes. But not all programmers opt to adhere to the norm. Other smart contracts may have trouble interacting with their token depending on which ERC20 functionalities the authors choose to ignore.
What are its uses?
- The ability to raise starting funding for new firms is one of the benefits of Ethereum. Tokens are new digital currencies that businesses generate and may sell on the Ethereum network. When a new currency launches its ICO, speculators are frequently eager to take a risk on it by buying the new token (initial coin offering). In actuality, this was how Ethereum’s ether currency was used to generate funds during its early stages. Other coins have also had success using crowdsourcing. Golem earned $8.6 million, while the Augur platform earned $5.3 million.
- A prediction market where users may get money by correctly predicting events can be created using the Augur protocol by developers. Instead of depending on a single report, as in a centralized prediction market, Augur defends itself from fraud by assembling several reports on the occurrence of the predicted events. No restrictions are imposed by Augur on the types of wagers you may make or the sums you can win. The wins cap won’t be imposed by Augur if you’re having a good run. Augur doesn’t deduct a percentage from your earnings either.
- It’s not universally popular for media behemoths like Facebook to store our personal information. In order to keep that data safer than it could ever be in the hands of for-profit businesses, several developers are working on ways to store it on the blockchain. In this manner, you might decide when to disclose personal information to a third party (e.g., applying for a school or job). You can once again protect your data when the application procedure is complete.
- Decentralized insurance might do away with the weeks and months that homeowners currently have to wait before receiving compensation for severe damage caused by a natural disaster. For instance, Etherisc promises to pay right away.
Due to its multipurpose software platform, which allows outside developers to build their own apps, Ethereum stands apart from other cryptocurrencies. Many business owners have launched their own cryptocurrency using the Ethereum platform. Naturally, ether is the native currency of Ethereum. People frequently mistake the cryptocurrency ether with the Ethereum network. Just keep in mind that technically, individuals exchange ether, not Ethereum. When people talk about the current Ethereum price, they really mean the price of ether.
