What is Ethereum?

Ethereum is a rival to Bitcoin. It is being called the second generation of Blockchain. Ethereum is an open source platform used to make decentralized application, smart contracts and DAO’s (Decentralized Autonomous Organization). Ethereum Platform has its own Cryptocurrency called Ether (Eth). You might be wondering why do we need ether if we already had Bitcoin?

Blockchain has many other applications other than just decentralizing Money. Bitcoin is a peer-to-peer system used to decentralize money. Ethereum is much more than that. Ethereum is decentralizing the world’s computer by allowing developers to built decentralized applications on top of Ethereum platform in a much simpler way. While Bitcoins aimed to disrupt the Banks, Ethereum has the goal of replacing third parties in other fields like finance, registries, voting, etc.

“Bitcoin is first and foremost a currency; this is one particular application of a blockchain. However, it is far from the only application. To take a past example of a similar situation, e-mail is one particular use of the internet, and for sure helped popularise it, but there are many others.” Dr. Gavin Wood, Ethereum Co-Founder.

What are Smart Contracts?

Ethereum basically runs smart contracts that are code snippets written in a programming language such as solidity and serpent. Smart contracts are programs that are automatically executed once specified conditions are met. For e.g. you need to sell a property in return for money, the traditional way would be to transfer papers in the name of the owner and then wait for money. On Ethereum platform, you can write a smart contract that specifies as soon as the property is transferred on to the name of the Owner, the amount should be deducted from the owner’s account and credited to your account. This not only makes the entire process trustworthy but also speeds up the process, also disrupting the need for any middle-man.

What is ether?

Ether is the Cryptocurrency that fuels the Ethereum Platform. Ether is the second largest Cryptocurrency after Bitcoin. Just like Bitcoin, it doesn’t need any third party to process its transaction. Ether is used to pay in return for goods and services required to run any transaction. Like, you have to pay some ether to the person who writes smart contracts for you. Every action on the network requires an amount of gas that’s based on computational power required to process your transaction. You have to purchase a sufficient amount of gas to let your transaction complete, which is paid into the ether.

How do Ethereum Blockchain Works?

The blockchain is a digital ledger that stores every transaction in the form of blocks. It is also called a global ledger. Every transaction after being verified by a group of miners or nodes is attached to the existing Blockchain. The blockchain is like linked-list, every previous block holds the address of the next block attached to it.

Whenever anyone initiates a transaction, code snippets run on the network which is read by Ethereum Virtual machine, as soon as some specific action takes place, there are a bunch of miners who are ready to validate the action. They earn few Ethers in return for validating the action. After reaching a consensus, the block is added to the Blockchain.

There are many applications that had been deployed on Ethereum platform:-

Weifund is one such crowdfunding platform that leverages smart contracts.

Argur is a platform that gives you rewards for your predictions on real-world events.

Provenance makes supply chain transparent by tracing the origin and history of the products, consumers. It can help you make informed decisions when buying products.

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