What is Ethereum and Ether?
Ethereum is more than just a Cryptocurrency
Note: This article was first published on April 10, 2016. Edits have been made to assure it’s accuracy.
Aside from the law analogy, Ethereum is a decentralized network consisting of two primary parts: Ether and Ethereum. Ethereum is the network, and Ether is the currency of the network. That’s it, aside from that, there are smart contracts. Smart contracts are described below and the source of all the buzz around Ethereum.
Ethereum is a new kind of law… It does this with the marriage of two special ingredients: a digital currency, and a complete programming language.
The secondary parts share similarities with other cryptocurrency too, but we already covered the important stuff (thanks Reddit for convoluted description):
Similar to Bitcoin, but called Ether. Used as a currency, but also to power “smart contracts”
This distributed database stores information about wallet balances and transactions.
- Consensus mechanism
This protects the blockchain through computational functions such as cryptographic equations and hashes.
A network of computers that record new transactions, run the consensus mechanism and print blocks on the blockchain approximately every 12 seconds .
Ethereum’s unique ability is its most recognized feature. One can store applications, or smart contracts, and run them. Just like any other programming lnguage, their ability is unlimited. From social media networks to currencies, stock issues, etc.
- Virtual machine
Smart contracts are executed by these computers that participate as the network to work as a single machine.
- Brave browser
Similar to Bitcoin Core wallet. This browser allows users to utilize decentralized applications built on Ethereum, running on gas, or ether.
Why Care about Ethereum?
It has been quickly gaining attention from major banks, financial institutions and technology companies. Companies like Microsoft, JP Morgan Chase, and IBM are currently experimenting with applications that utilize the Ethereum’s network and scripting abilities. Most of these companies are utilizing Ethereum’s applications in fintech, the internet of things, and various other buzzwords. Companies like this are appealing to cryptocurrency communities without destroying them. Why hasn’t IBM bought all the Bitcoin? Because doing so would essentially destroy it!
History of Ethereum
Vitalik Buterin published the Smart Contract White Paper in late 2013 after years of engagement in the Bitcoin community. He saw many ways improve Bitcoin, and forked a version to develop on his own. He soon gathered the attention of others, specifically Dr Gavin Wood. Ethereum was introduced publically in January 2014 through an announcement on CoinDesk.
Ethereum is a project run by two companies: Ethereum Switzerland GmbH and Ethereum Project (non-profit). Since it’s public blockchain launch on July, 2015; both ether’s price and news has gone viral. With coverage from the New York Times becoming more commonplace, Ethereum has steadily gained market share in the (already) crowded cryptocurrency market.
Ethereum Smart Contracts
Smart contracts allow applications to be developed on top of Ethereum’s blockchain. They may utilize computational power, store information, or act as proof of something. Applications range from social networks, to issuing stocks or bonds. Smart contracts prove to be Ethereum’s most valuable feature and a chunk of its klout. As programming is theoretically infinite, so are smart contracts, they are merely limited by the typer of the program. These smart contracts are currently being tested and utilized by larger companies to act as a way to move towards more transparent communications.
Ethereum Faces Challenges
The New York Times noted in March 2016 that Ethereum’s rapid momentum gain may actually cause problems. Due to low platform adoption, and early in development and testing, problems are bound to occur. Ethereum could possibly encounter technical and legal problems, just like Bitcoin, in the future, that would ultimately slow distributed network’s growth. People experienced in cryptocurrency argue that Ethereum could face catastrophic failure due to its complexity, and possibly more security problems than Bitcoin because of that. It goes without saying that Ethereum has faced much less testing, and many fewer attacks, than Bitcoin.”
Ethereum is the Future
There’s Bitcoin, the currency, I think is going to go nowhere and that’s not because of anything to do with technology.
The advent of second and third generation cryptocurrency are starting to steal the spotlight from Bitcoin. Just like Bitcoin, their beginnings will be rough and arduous. The advantage Ethereum network has over Bitcoin, aside from the obvious technical ones, is their ability to learn in hindsight from Bitcoin’s “mistakes”.
Ethereum has tremendous promise. Th meat of promise relies upon its unique smart contracts. Bitcoin is the first cryptocurrency, highest market cap, and strongest community, and therefore will never go out of fashion. It may be possible that untold circumstances may arrive out of indeterminable events, but for now, Ethereum is gaining momentum as the “Bitcoin of second generation cryptocurrency”.
Let us know what you think in the comments below!