Ethereum as a new
era of the Internet

Cryptocurrency Ethereum is generally referred to as Ether or ETH for short.

The official website of this cryptocurrency states that "Ethereum is the basis of a new era of the Internet: of the Internet with a built-in money and payment system.
The Internet, where data belongs to users, applications do not steal and, users are not being monitored.
The Internet, where everyone has access to an open financial system.
The Internet, built on the principles of neutrality and openness, uncontrolled by either companies or individuals".

The developers also claim that Ethereum is the world's leading programmable blockchain.

In essence, Ethereum is an open-source software platform on blockchain technology that allows users to create decentralized applications (Dapps) on its basis.

The main distinguishing feature of the Ether is the use of smart-contracts.

Does it make any sense to you? If not, let's figure it out together.

  • 1. Briefly about the Ethereum.
  • 2. History of the Ethereum.
  • 3. One again about the blockchain.
  • 4. The world of the Ethereum
  • 5. Smart contracts.
  • 6. Prospects.
1. Briefly about the Ethereum:
  • icon-1-decenter
    Ethereum is decentralized.
  • icon-2-app
    Ethereum is based on the blockchain.
  • icon-3-onblockchain
    Ethereum has open-source code.
  • icon-4-limit
    It is possible to create new applications and projects on the blockchain of the Ethereum, including smart contracts.
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    The emission of Ethereum is not limited. There is only a limit of 18 million coins per year
  • icon-6-smart
    Ethereum uses revolutionary "smart contracts".

Ethereum is similar to Bitcoin and other coins. But Ether is much more than just a blockchain-platform, which performs a direct function of currency services. It's a complex system, the idea of which is to combine completely different areas and improve processes, optimize routine operations.

If the idea of Ether is brought to life, it will change the world. It may seem like these are only loud words. But just imagine what can be done with such an invention!

2. The background of the Ethereum

A small historical tour to understand the system and feel the grandeur of the project.

The founder of the Ether is a simple guy Vitalik Buterin, who originated from the Russian city of Kolomna and has been living in Canada since he turned 6,

Vitalik's father was a programmer, so his son -who was just 7 years old - was already working on computer games in Excel, where the movements of rabbits were made according to the provided formulas. He studied in Canada and graduated from a school for gifted children. While studying at Waterloo University, Buterin was already involved in several projects that took up almost all of his time. He decided to spent it on projects rather than education and then left the university.

At the age of 17, Vitalik first encountered Bitcoin, which immediately made him interested. In order to earn his first bitcoins, he wrote articles about the cryptocurrency for a magazine, receiving payments in BTC.

Later, Buterin was noticed by a Romanian bitcoin enthusiast, Mihai Alisie. In May 2012, Mihai and Vitalik became partners and created a new magazine named "Bitcoin Magazine".

Vitalik started to travel around the world exploring existing crypto projects in other countries. He discovered that all cryptocurrency systems are limited to an application that runs them. At that time, Vitalik came up with the idea of creating a new decentralized system that could be used by any developer, allowing them to create new applications and services based on it.

Vitalik offered to implement this idea to entrepreneurs with whom he communicated during his travels, but everyone told that the world was not ready for such a product.

Then he decided to realize the plan on his own. Buterin described his ideas in detail and published White Paper - a reference document explaining the policy and technical specifications of the project - in late 2013. At that time, he was 19 years old.
Vitalik presented his project to the world, having doubts about it. He expected that experts would find errors, and many comments would appear. However, the project was welcomed by his acquaintances, acquaintances of his acquaintances who shared the documents with others, and some of them were ready to participate in the work on the Ethereum creation.

There was no considerable criticism, he drew a lot of attention to himself and received Thiel Fellowship for $100,000. This award is given to young entrepreneurs to implement innovative projects.

In 2014, Vitalik presented his idea at the BTC conference in Miami. At the end of the speech, all listeners gave a standing ovation. It was a great success.

Development of Ethereum began through the Swiss company Ethereum Switzerland GmbH (EthSuisse) in 2014, and later the non-profit Ethereum Foundation (Stiftung Ethereum) was founded.

According to White Paper, Ethereum is described as "the decentralized mining network and software development platform".

3. Once again, about the Blockchain

Ethereum uses Blockchain technology, as does Bitcoin and many other cryptocurrencies. Officially, blockchain is defined as a distributed database. We have written about blockchain in other articles, but we can parse the meaning of blockchain once again using a simple example.

Blockchain is a system that does not belong to anyone but can be accessed by anyone after a certain registration procedure.

Let's compare this network to a set of files similar to those in the folders stored on our computers. New files and folders appear all the time in the network.

Crypto coins consist of such files. Cryptocurrency is not a simple file that we are used to, and which can be created by anybody. These files consist of digital codes that contain information encrypted by a special system. If we decrypt such code, we will know who, to whom and in what quantity passed a particular coin, how it was emitted, and to whom it was passed as a result of this or that transaction.

The blockchain always generates new codes, which are collected in blocks when a certain size is reached. Codes are generated when a coin transaction occurs. These operations are confirmed by such ciphers.

To validate the transaction, users kind of "read" the information in the common registry that provides information that user A received a coin from the user B; that it truly belongs to him, and that he can send it now to the user E. All this information is confirmed by the generation of a new code.

Blocks are linked and uninterrupted. In other words, the information that User A bought the coin from User B is in the block 18, and the information that User A wants to sell the coin to another user now is in the block 19. It is no longer possible to change this information because block 18 is already closed, and other files are already there. Therefore, the entire chain of blocks is continuous, and operations are irreversible. Thus, they cannot be changed.

Codes consist of dozens of characters, and it would take a lot of time for an ordinary person to pick them up. That's why code selection tasks are performed with the help of computing power of PCs and special devices. All this information is encrypted and decrypted by the system itself, it generates and writes the codes, and the user only sees the data and starts the process of transaction and confirmation, but in fact, he can not create, record and check all the numbers in the codes by himself. Any transaction with a coin is considered correct if it has passed the verification and validation process confirmed by the appropriate code. If the code is not matched, the coin transaction will not be executed, will not get into the block file, and the money will remain with the owner.

When a coin is involved in a transaction, a notification is sent to all network members, which are millions. Those who want to participate in the confirmation of the transaction response to the notification and start working, or rather their equipment does. The more powerful the equipment, the faster the process is, and therefore the more transactions will be processed.

Those users who perform the process are called miners. It is their professional task to carry out this process called mining. They purchase the right machines, invest in them, monitor upgrades, and so on. All because they are receiving a reward for this work in the form of the cryptocurrency, which is mined.

In this way, the system is maintained running and new coins appear - the emission takes place, and users earn money.

4. The world of the Ethereum

The described above is relevant for projects where coins are generated and transferred when paying for some products or when buying and selling the currency itself.

However, Ethereum is not limited only to these purposes. The project allows users to create their own blockchain products, in particular, various games, applications for the exchange of things, and many other services, ranging from charity funds to bookmakers were created on the basis of the Ether. Such projects can use their own coins for payments, and that is why new cryptocurrencies based on the Ethereum emerge. Ethereum has standardized this process using the ERC-20 protocol.

Users of the created services pay the "parental" system - Ethereum - for the use of the Ether blockchain and generation of certain functions. Payments are made in ETH, which are generated by the system.

Let's analyze it using the example of the Excel editor.

The excel program itself is a limitless table. It can be used for a huge number of purposes - to calculate something, to make documents, to create a complex system with formulas and calculations, etc. About the same way Ethereum network serves - on its basis users can not only sell, buy, create cryptocurrencies but also develop new applications and services, using the existing blockchain solutions.

5. Smart contracts

Another important difference between Ethereum and other coins - its "cherry on the cake" - the system of smart contracts.

The concept of smart contracts was known back in the nineties. Of course, it is hard to imagine, but the first time the idea of smart contracts was described by scientist Nick Sabo back in 1996. He also described the principle of Bit Gold - digital money, which became the prototype of Bitcoin.

Smart contracts are algorithms in the network that track if-then type operations. They oversee the compliance of all parties with the terms of the transaction (performing actions, transferring money, etc.).

For example, such a function can be applied in the case of payments for electricity. Let's say the system is configured in such a way that if 500 kW of electricity is consumed, some amount of money is charged from the client's account. And if the payment is not received, the electricity supply is disabled. All of these can be embedded in the algorithm of the system and implemented without the involvement of a person - this is called a smart contract.

Similarly, you can program, for example, an algorithm for renting an apartment: if the guest has paid the set amount for accommodation, then the lock of the entrance door to the apartment opens, and the person can use the room. If payment has not been received, the door will become locked, and access is terminated.

There are many examples where the use of smart contracts is possible. The most popular industry for smart contracts and Blockchain technology is finance and banking. However, in the future, smart contracts will be implemented in insurance, auditing, supply, logistics, and many other areas. The main task and benefit of this algorithm is the minimization of human labor where possible, and it eliminates errors, corruption, fraud, and the human factor in general.

Smart contracts eliminate the need for an intermediary, which increases speed, increases safety, and reduces the costs of transaction processing.

Ethereum network has data blocks consisting of transactions and smart contracts. These blocks are interconnected and represent a full record of the network history starting from the first block.

6. Prospects

It's believed that Ethereum is similar to Bitcoin, but, actually, there is not quite so. They belong to different generations - ETH is far ahead of other cryptocurrencies, and they have different targets. Bitcoin was created as digital gold and the most commonly used digital billing tool, while Ethereum was designed as a platform for developing new applications and smart contracts.

If we talk about competition between the two most popular crypto coins, we can confidently say that Ethereum is a rival for almost all crypto coins.

It is a truly successful project. There is a whole team of advanced experts working on it, who are constantly improving the efficiency and technological maturity of the product.

As the Ether is constantly evolving, and new projects appear based on its blockchain, the cost of Ether tokens is growing. Therefore, the demand for Ethereum blockchain is steadily moving up, while its token emission is limited to 18 million coins per year.

All these factors show that investments in the Ethereum are definitely profitable. The capabilities of the powerful ecosystem of Ethereum are limited only by the imagination of the user, so participation in it will be a win-win decision.