What is Ethereum?
Ethereum is an open-source, public, decentralized software platform that runs smart contracts on a shared global Blockchain. It provides developers with the Ethereum Virtual Machine (EVM), a Turing-complete virtual machine used to build decentralized applications on the Blockchain.
You can think of Ethereum as a “distributed world computer” where developers can create decentralized applications that run without interference from a third party, censorship, fraud or downtime.
Who invented Ethereum?
Ethereum was proposed in 2013 by Vitalik Buterin, a Russian programmer and writer who was already involved with Bitcoin. Shortly thereafter he published the Ethereum white paper. Dr. Gavin Wood joined the project at that time and wrote the Ethereum yellow paper allowing the development of the Ethereum client.
In order to bootstrap the network (consisting of investors, developers, miners, etc) a non-profit foundation was created, the Ethereum Foundation. In July 2014, a public online crowdsale of Ether (the value token of the Ethereum Blockchain) was launched as well and an amount of 31,591 Bitcoins was raised. The crowdsale was at that time the highest funded crowdfunding project of all time with an estimated amount of $18,439,086. And since then, Ethereum continued to grow and attract developers, investors, corporations and banks from all around the world.
What is Ether?
Ether is the intrinsic currency of the Ethereum Blockchain; it is used by participants in the network to pay for transaction costs and to reward miners.
Ether’s value hit an all time high in May 2017 above $90 with a total market capitalization of $8.5 billion, second behind Bitcoin with more than $25 billion.
What is the difference between Bitcoin and Ethereum?
Well, Bitcoin was inherently designed to act as a medium for value storage and transfer while Ethereum provides a platform (and even its proper programming language) for developing applications that are only limited by the imagination of the developers. So it is possible to issue a new cryptocurrency on top of the Ethereum Blockchain protocol. In a nutshell, Bitcoin is just a single application of the Blockchain technology whereas Ethereum is a flexible programming platform built on top of a Blockchain.
Similarities between Bitcoin and Ethereum include using the Blockchain technology (obviously), both tokens can be mined, the use of proof of work to validate generated blocks and many more.
What advantages does Ethereum offer?
Decentralization: like Bitcoin, the Ethereum Blockchain is distributed across all nodes inside the network, so is power and influence, which means no central authority can censor, destroy, or interfere with Ethereum. No need for third parties. This also means that even if a part of the network fails for some reason, the Blockchain and all applications running on it will survive.
Cost effectiveness: low costs and fees due to the removal of middlemen.
Immutability: as long as the network is run by a majority of “honest” nodes, nobody can alter anything on the Blockchain.
Security: all transactions in the Ethereum environment are cryptographically-secured.
Smart contracts: applications on the Blockchain that can self-execute according to the code governing them and manage all necessary operations automatically, eliminating trust barriers and third parties.
What can be done using Ethereum?
The number of potential use cases of Ethereum could be huge. Any system requiring trust between different parties, automation, efficiency and transparency can be built using Ethereum. Examples include voting systems, crowdfunding, blind auctions, prediction markets, the internet-of-things, medical records, digital tokens and Cryptocurrencies that can represent assets, other currencies (digital or fiat) or anything.
One of the most interesting applications of Ethereum is DAOs, decentralized autonomous organizations which are organizations funded and run by a set of smart contracts on the Blockchain independently of any human intervention. Sadly, in July 2016, the DAO, the first project that attempted to make this idea a reality, was hacked after it set the record for the largest crowdfunded campaign in history with a whopping $150 million. The hackers exploited a flaw in the code (not in the Ethereum Blockchain) to drain the project of $50 million. Eventually the Ethereum community decided to perform a hard-fork to restore the stolen tokens which caused a lot of controversy because that decision went against the principle of immutability of the Blockchain