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What is Ethereum and why it overcomes Bitcoin

By Giacomo Altadonna

When the World Wide Web started to develop, the idea of an electronic mail service was considered the most important one. Later, after the E-Mail had been well established, people started to find other uses for the web. E-commerce, video and music streaming, or social media were almost unimaginable at the beginning of the development of the internet, but right now they have relegated the E-Mail in a marginal spot.

We could apply the same reasoning to Blockchain, Bitcoin and Ethereum. Bitcoin was the first main breakthrough in Blockchain and Satoshi Nakamoto presented it as a “peer-to-peer electronic cash system”. The idea was genius, and it made groundbreaking advancements in solving trust-related problems. However, many of the closest Bitcoin affectionate felt Bitcoin was incomplete and limited. Blockchain technology seemed to have extraordinary potential other than cryptocurrencies but modifying Bitcoin or creating a new Blockchain from scratch was time-consuming and required high level programming skills. Vitalik Buterin, a Russian-Canadian programmer aged 19, developed a solution and proposed Ethereum in 2013.

Ethereum can be interpreted as a multi-tasking blockchain. Ethereum has its own cryptocurrency (it actually has two, we will have a quick look at them later) but Ethereum is not focused on transactions involving money. Ethereum is a basis to build and deploy decentralized applications, the Dapps, using its programming code. You can build whatever application you want using Ethereum, from voting systems, to registries or even creating other cryptocurrencies. Furthermore, you can program with whatever language you decide to use, because Ethereum unlike Bitcoin is Turing-complete, which means that whatever programming language you’ll talk to it, it will understand you.

The main idea behind Ethereum is the smart contract, which doesn’t differ by much from an actual contract. All the applications that run on Ethereum work with smart contracts, which you can imagine as phrases of computer code. From the applications, the contracts arrive in the Ethereum Blockchain. The Ethereum Blockchain accepts the contract after a transaction fee paid in Ether (one of the two cryptocurrencies) by the developers of the contract. The contract has a series conditions, when these are met, something happen, generally a transaction involving cryptocurrency. Before its execution, the contract has to be validated by the miners of the blockchain. In doing so, they earn a fee in “gas”, the other cryptocurrency in Ethereum. The miners also execute the contract. Again, the execution of a contract requires “gas”, which makes us understand the reason of this name. While Ether is more similar to a form of currency, “gas” is what makes the whole thing move on.

Other than Dapps, the other big thing of Ethereum are the Decentralized Autonomous Organizations, or DAOs in jargon. Similarly to applications, you can use Ethereum code to build autonomous organizations. A DAO is then tokenized and its token sold. Whoever acquires its token, acquires voting rights inside the organization, proportionally to the number of tokens owned.

Don’t forget that you are using Blockchain technology, which means that Dapps and DAOs cannot:

- Be changed by a third party.

- Be corrupted or censored

- Be used to track who developed them, because Blockchain is anonymous

- Be shut down or switched off.

Your effort and your data are totally protected by the distributed network. Ain’t it cool? You can build your own private blockchain for your business or revolutionize bureaucracy!

#BBCA #Ethereum #Learningseries #Cryptocurrency

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