Bitcoin is the first cryptocurrency, giving the start of the entire industry. It works via blockchain technology, technical and economic mechanics.
Primarily envisioned as a store of value and medium of value exchange outside of the jurisdiction of governments or third parties, Bitcoin’s application focuses on providing individual economic freedom through creating a novel financial technology.
However, the application of blockchain technology, cryptography, distributed computing, and economics in a system such as Bitcoin’s only was the tip of the iceberg to a future industry of vast potential. Ethereum opened the door to the potential of utilizing blockchain technology for a wide variety of applications.
What is Ethereum?
It is an open-source blockchain which is public. It is decentralized and has smart contract functionalities which are turing-complete.
Vitalik Buterin proposed the idea of creating such a platform in 2013 and since then it has established itself as the second most popular crypto after Bitcoin.
The History of Ethereum
Its history is very controversial and crucial. It has been quite impactful on the present status of crypto. The white paper which was created by Vitalic actually marked the start of Ethereum. The goal was making a platform which would fully use the potential of blockchain. It provides a blockchain with Turing-complete language inside. It can come up with the so-called contracts, which have the task of encoding transition functions. It will be able to do whatever one desires after he writes a few lines of code.
Smart contracts are the main part of this technology. They can be described as self-executing codes that help with any exchange. Once particular conditions are met, the program runs. It is not affected by other parties and there is no censorship or downtime.
Many thought the idea was very clever right from the start. The platform’s core innovation is called “Ethereum Virtual Machine.” It is a code which is turing-complete. With it you can execute any program on the blockchain, no matter the language. In this way decentralized apps are enabled and all is happening in one place.
In 2014 started the development of Ethereum. At the beginning, COO was Joseph Lubin who is still actively contributing to the crypto community. He later on created ConsenSys.
In a crowdsale in 2014 Ethereum managed to raise over $14 million. A year later the currency Ether was given to all of those who have invested and to the developers in the team. The rest was put into the Ethereum Foundation.
In 2015, Ethereum launched for the first time (the release was called “Frontier”). A year later came the very first upgrade called “Homestead”. With it the platform became much more stable and has included considerations of the value of gas, processing of transactions and security. Many were concerned with the security issues that might occur, given that it is a platform with many development applications.
Ethereum – The Way It Works
The Ethereum Virtual Machine is a Turing-complete software. It runs on the Ethereum network. It allows for the execution and storage of smart contracts, DAOs and much more. It helps developers build decentralized apps on it which might be games, organizations, and etc.
Ethereum follows the principles of:
- Simplicity – Protocols have to be very efficient. It doesn’t matter whether data storage or the time has to suffer.
- Universality – An internal language made for developers in order to create a smart contract or transaction type.
- Modularity – The protocol has to be modular and separable.
- Agility – The protocol could be improved when it comes to its architecture, security and etc.
- Non-Discrimination/Non-Censorship – The protocol shouldn’t restrict or prevent specific usage categories.
Pros of Ethereum
The pros of Ethereum compared to other blockchain-based platforms are:
- Immutability – Nobody from the outside can make changes to data.
- Corruption/Tamper Proof – Censorship is unfeasible with the PoW consensus of the vast and decentralized network agreeing on its global state.
- Security – The PoW consensus, cryptographic techniques and lack of a central point of failure stops hacking attacks.
- No Downtime – Apps, smart contracts and others are always running and can’t be stopped.
The Downsides of Ethereum
As a Turing-complete platform, Ethereum has some downsides which could be taken advantage of via the complexity of the primary programming language which appears in smart contracts, Solidity. The latter has become a big concern and after the DAO hack, many started guessing the long-term viability of smart contracts in the future.
Another vital part of Ethereum is Security and Decentralization over Scalability. Ethereum might seem inconvenient for some people when you think of all the costs connected to gas and the low-throughput capacity. We are expecting new solutions helping with scalability to appear soon.