Ethereum was created by programmer Vitalik Buterin, after being inspired by the possibilities of Bitcoin’s concept of a decentralised blockchain system.
While Satoshi Nakamoto’s inspiration for creating Bitcoin was to cut out third-party financial institutions and banks in currency trading, Buterin wanted to test the blockchain concept with a much wider application.
Cryptocurrency
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WHAT IS ETHEREUM?
| Function | Distribution, inc currency – Ether (Ξ) |
| Ledger born | 30/7/15 |
| Timestamping scheme | Proof-of-Work |
| Block reward | Ξ2 |
| Block completion time ave | 15 seconds |
| Circulating supply | 109,700,000 |
| Supply limit | - |
EthereumOne of the most popular cryptocurrencies on the market, Ethereum’s application is different to traditional cryptocurrencies in that its coin, Ether, functions as a token specifically designed to grant access to dApps. dApps are created and intended for use exclusively on the Ethereum blockchain, making them public accessible decentralised digital systems.The benefit of sending code through the blockchain network is its P2P-public ledger security and independence from third parties, much the same as Bitcoins’ application in sending finance.
However, Ethereum’s capabilities of transferring all code rather than just code triggering finance transfers makes it a limitless application.
Bitcoin is a ‘first-gen’ blockchain, meaning it was created to perform simple tasks compared to some of the newer blockchain models.
But what the Bitcoin blockchain lacked in flexibility it made up for in security.
Second gen blockchains like Ethereum are capable of more, allowing far more complicated tasks than a Bitcoin transfer, which generally functions to simply dictate the amount of Bitcoin being moved.
WHAT ARE DAPPS?
Ethereum is the platform where users can build, share and use their own Dapps (decentralised applications), which are programs capable of being shared within the Ethereum blockchain network.
Or simply, developers can use Ethereum’s blockchain network to send code from one device to another, which can be used to operate programs.
When these Dapps are employed to the network, the same blockchain system of verification is triggered, and miners operating from thousands of nodes will update the block to the chain.
This same blockchain concept as Bitcoin trading gives Ethereum the capability of providing a decentralised platform where users can interact and perform almost any task without reliance of a third party.
This internet-based direct mode of communication and information sharing can allow users to perform any digital task without relying on the help of third parties, potentially making brands like Amazon, Facebook and DropBox redundant.
This is where the cryptocurrency comes in when using Ethereum.
DappsDecentralised Application, An open-source (publicly available) computer program leveraging its functionality from the blockchain. A Dapp is a decentralised application storing the entirety of its data on a blockchain, offering tokens to users as reward for use.WHAT IS ETHER?
Ether is the currency traded in return for the transferred information and resulting access to Dapps.
EtherEther is the currency traded in return for the transferred information and resulting access to dApps on the Ethereum network.The currency is also required by coders uploading to the network’s blockchain as a means of quality control and optimising Ethereum’s computing power.
Ether also works much in the same way as Bitcoin in that miners verify transactions and are rewarded with cryptocurrency.
Because these programs on the Ethereum network are publicly accessible, anyone can use ether to gain access if they meet the demands of the attached smart contracts
smart contractsDictates the terms in which information can be sent and received between parties on a blockchain network. Differs from a regular contract in that it is written in code and stored on a blockchain, so both parties have access and its terms remain permanent..
Where Ethereum differs from Bitcoin is its use of smart contracts, which dictate the terms in which information can be sent and received between parties.
A smart contract is written into a Dapp and is self-executing, meaning the Dapp itself determines if and when an information transaction can be completed, and access granted.
The terms of a smart contract are permanent once they have been programmed into the Dapp and the information added to the blockchain network.
The conditions attached to these smart contracts are also extraordinarily rigid, meaning even the most complicated terms must be completed perfectly before access is granted.
WHAT HAPPENED IN ETHEREUM’S DAO INCIDENT?
This concept of the smart contract was thought to be water-tight by its creators, however it failed to consider the difficulty in securing an agreement with growing complexity.
As a smart contract becomes more complicated, so do the potential scenarios of execution.
Hackers were able to manipulate these factors of a particular smart contract attached to a DAO (decentralised autonomous organisation), which was programmed to make investments automatically using funds deposited by investors.
DAODecentralised Autonomous Organisation, organisations run by a blockchain-based application, rather than by people. The publicly accessible algorithm has input by all users, rather than just a traditional body like a board or directorship.The DAO had made around $US150 million in Ether when a hacker took advantage of the loopholes found in its complex smart contract, draining the entirety of the DAO’s funds.
Ethereum developers broke their own strict fundamental concept on smart contracts by bailing out the DAO and adjusting the system to reinstate the funds, which led to a revolt of sorts from Ethereum users.
With this change in protocol came a new blockchain, which today is known as Ethereum Classic
Ethereum ClassicThe original Ethereum blockchain, renamed following the original cryptocurrency’s hard fork..
The users who didn’t agree with Ethereum’s change in protocol continue to use the original blockchain, still called Ethereum.
WHAT IS A FORK?
This divergence of the Ethereum blockchain is perhaps one of the more renowned examples of what is known as a fork.
forkA fork is simply a change in a cryptocurrency’s protocol, or a change in its guiding rule book making previous versions of blocks within the blockchain invalid. This produces a fork in procedure and the splitting of a blockchain to birth a new cryptocurrency.Forks are an important factor in the cryptocurrency world, as the rate of growth, innovation and change sees a constant readjustment and introduction of new types of cryptocurrencies.
An event like Ethereum’s fork will often produce a new breakaway cryptocurrency.
The new cryptocurrency interacts with a version of the same blockchain, just running side-by-side under new procedure protocols.
The DAO event and the subsequent arrival of Ethereum and Ethereum Classic is what is known as a hard fork event.
Hard forks are usually unplanned and extreme events of protocol change warranting the introduction of a new cryptocurrency.
Ethereum experienced more hard fork disruptions after the DAO, which saw the arrival of EtherZero
EtherZeroAn Ethereum hard fork cryptocurrency creation focused on trying to provide faster and cheaper transactions than its predecessor. and Metropolis
MetropolisMetropolis is a hard fork of the Ethereum blockchain executed by an adjustment in blockchain protocol in an attempt to make the platform more scalable and secure..
WHAT IS A SOFT FORK?
There are also soft forks, which are more subtle versions of hard forks allowing changes to a system while still being compatible with the original blockchain.
soft forksSubtle versions of hard forks allowing changes to a system while still being compatible with the original blockchain, usually in the form of minor protocol changes to optimise blockchain performance.This is usually regarded more as blockchain maintenance, which can sometimes mean protocol changes, but more often means minor and insignificant changes in blockchain performance.
One of the more common examples of soft forks changes in block characteristics.
PoW blockchains sometimes have the size capabilities of their blocks adjusted, which influences miners’ ability to validate blockchain transactions.
Minors have a choice whether to adopt the changes or reject them.
This produces a minor fork and a divergence in a factor of how a cryptocurrency functions, and not enough of a disturbance to warrant the creation of an entirely new cryptocurrency from the original blockchain.
Outside smart contracts and network application, Ethereum differs from Bitcoin in several ways, mainly in its optimisation of evolving technology and new concepts.
Miners complete blocks to add to the blockchain in around 15 seconds, compared to on average around 10 minutes on the Bitcoin network.
While Bitcoin has a hard cap of 21 million coins within its system, Ethereum to this point has no limits on its supply of Ether.
FAQ
What is Ethereum?
Ethereum was inspired by the possibilities of Bitcoin’s concept of a decentralised blockchain system. While Bitcoin was created to cut out third-party financial institutions and banks in currency trading, Ethereum tests the blockchain concept with a much wider application.
What are Dapps?
Decentralised applications (Dapps) are programs capable of being shared within the Ethereum blockchain network. Developers send code from one device to another, which can be used to operate programs designed, built and shared by users on the Ethereum network.
What is a smart contract?
Smart contracts dictate the terms in which information can be sent and received between parties on a blockchain network. A smart contract is written into a Dapp and is self-executing, meaning the Dapp itself determines if and when an information transaction can be completed, and access granted.
What is a fork?
Forks are an adjustment in a blockchain’s algorithm disruptive enough to break away and form a new type of cryptocurrency A new cryptocurrency interacts with a version of the original cryptocurrency’s blockchain, just running side-by-side under new procedure protocols. Forks are a result of a fast rate of growth, innovation and change in the cryptocurrency world. They are also proof of cryptocurrency’s decentralisation credentials in that a lack of consensus from users on how a coin should function will sometimes lead to a mutiny]
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