What Is Ethereum (and why is it so amazing?) – Cryptolete – Medium
Ethereum was invented by Vitalik Buterin, a Russian-Canadian programmer.
Ethereum, however, is also a software platform. The ethereum network allows developers to build decentralized apps, called “dapps,” on top of it. This is sort of like how developers can create software on top of the microsoft platform. They can develop word, excel, powerpoint, etc. And it all goes on top of microsoft.
Bitcoin decentralized currency and the banking system. Ethereum decentralizes almost everything else. It’s called the blockchain 2.0. Allowing developers to create decentralized apps on top of the ethereum network means that things such as insurance companies, home titles, car titles, social platforms, online retailers and more can all be used on the ethereum network.
Let’s give some examples to clear things up.
1. Ebay/Amazon — There’s a buyer, a seller, and the middleman (Ebay/Amazon). The middleman sets everything up and collects fees for the transactions and the platform. You can decentralize this to take out the middleman, put all of the rules on the ethereum blockchain, and then trust the network. Just how bitcoin transfers our trust from the banks into the bitcoin network, ethereum transfers our trust from whatever company the app is replacing, and puts it on the network.
2. Let’s take Facebook as another example. With facebook, you upload a picture and information about yourself. They now own that picture and your information. It’s all stored on their servers. And they can sell your information to companies. If there was a decentralized social app similar to facebook built on the ethereum blockchain, no one would own your information but you. Also, because no one owns it, it wouldn’t be censored.
3. If you look at dropbox or google drive, or even youtube, what you’re doing when you upload your files to these things is you are uploading them to their servers. With ethereum, you can upload files to the decentralized network, and it will be split into a million parts and be stored on computers around the world. And if you wanted your files, you can just put in your keys and get them.
4. POLL is a decentralized polling application that lets people vote on the blockchain. This can allow people to vote from anywhere they want, as opposed to having to go to a voting booth and standing in line. And it can eliminate voting fraud because everything is secure on the blockchain.
5. Medicalchain and other medical-based companies are using blockchain technology to speed up the transfer of medical information from hospitals to doctor’s offices. If there was a decentralized network that can hold medical information, then, theoretically, every hospital and doctor’s office in the world can log into it and get the information they need at any time. Since the network is decentralized, there wouldn’t be any point of failure or anyway a hacker can steal information.
As you can see, there are many, many different use cases for decentralized applications.
These new dapps issue coins and tokens. Before they enter the market, have what’s known as an initial coin offering, or ICO.*
Initial Coin Offerings
Ethereum is the crypto of choice for ICO’s. ICOs are usually paid for with ether.
Ethereum also has smart contracts. Smart contracts are the same as normal contracts, but they’re on the blockchain which means that they can’t be tampered with. And once a smart contract is initiated, it can’t be undone. It’s set in stone. You can’t alter it after the fact. If you write up a contract on paper, someone can still change it. You can’t change smart contracts.
Another thing that separates smart contracts from regular contracts is that smart contracts can initiate orders based off of triggers. If you’re familiar with email marketing, you might know that you can set off a trigger for a particular email if the individual puts in certain information. If they do x, then y happens. If they don’t do x, then y never happens. Smart contracts can do this.
This creates a cryptographically secure way to manage contracts, manage properties, create decentralized, user-controlled social messaging and sharing platforms, create secure online voting with distributed governance. The most exciting applications that will be on the ethereum haven’t even been thought of yet.
When the internet came out, no one could have predicted that facebook and other applications were going to be built. The same can be said for ethereum.
In summary, ethereum is a universal, programmable, open client, decentralized blockchain that allows developers to create their own decentralized apps on top of its platform. It is the second most widely used cryptocurrency after bitcoin. And it is forever evolving and improving.
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*ICOs = Initial Coin Offerings. This was the main way how cryptocurrencies were “offered” to the public. Much like an “IPO,” or “initial public offering,” which is when a company goes public on a stock exchange, and “ICO” is when a crypto would be available to be purchased. Usually it would be through multiple stages that would start out with the founders and initial investors in seed rounds and eventually lead to the public being allowed to purchase the coins on the exchange. In 2019, exchanges themselves started issuing cryptocurrencies in “initial exchange offerings,” or “IEOs,” which followed a similar structure. Many investors (and regulators) wanted a more regulated approach to investing into cryptocurrencies in their early rounds. “Security Token Offerings,” or “STOs” are a more regulated approach to purchasing cryptocurrencies.