What is Ethereum?

Summary

  • As Internet stores our personal data because of its easy access, companies like Google and Facebook are making a large profit from specially tailored advertisements.
  • Ethereum creators wanted to make the internet a safe place, trying to make it decentralised so users could have a complete control of their information.
  • Being the second most popular crypto platform, Ethereum’s cryptocurrency Ether (ETH) attracts many investors.
  • Bitcoin and Ethereum are often being compared, but they only share the same idea; Ethereum is adding new features to its network.

To comprehend what Ethereum really is, it is essential to comprehend Internet first.

Internet history, passwords, bank details and our personal information are stored online, available for anyone who is good enough at hacking into personal computers.

For companies like Google and Facebook, these pieces of information are a gold mine because they can understand their audience better by tailoring ads and gaining profit from it. On the other hand, national governments and criminals can take personal information from the people, selling or exposing them for their own personal gain.

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Even though the Internet is undoubtedly a great invention and has helped with many things that could not have been imagined a while ago (online libraries, electronic signatures and instant video calls from different countries), its users are committing to give up their data in order to use the Internet perks, which then Internet stores without any shame. Here is where Ethereum comes to the rescue.

Decentralised Internet

The idea behind starting up Ethereum was to follow the movement that wants to have decentralised Internet. Ethereum wants to replace third parties on the Internet that stores all data ever provided, promising its audience the outmost anonymity, without keeping any financial details or similar.

Essentially, Ethereum creators wanted it to be a world computer that would be completely decentralised, and according to some, democratised.

The focus was put on the user, not the third-party app that was suggested to the users via Google Pay Store or Google itself. Every time people would want to save or delete something on the Internet, apps would save it deep in the server and remodel the nodes. Ethereum’s agenda was completely on the opposite – but some were still sceptical about the scheme.

What is Ethereum today?

Presently, Ethereum offers a digital platform for financial transactions and regular online services that promise not to store any user data. It is also the second most popular cryptocurrency platform (the first one being Bitcoin), with its own currency Ether (ETH).

DO READ: Types of Cryptocurrency- Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin And Ripple

Just like Bitcoin, Ethereum operates on a blockchain software so the data is being secured with hard-working miners. The Ethereum website promises a value-based economy, not surveillance-based.

Only by having access to the Internet, anyone can be a part of the Ethereum to make financial actions and decisions. Also, Ethereum supports peer-to-peer network, where transactions are being made immediately with some other person. No other third-party companies are required to finalise the payments.

Ethereum maintains autonomy by having volunteers around the world that run the platform. Due to that, it can never go offline and does not keep any personal information about its users.

Even though Bitcoin and Ethereum are constantly being compared to each other, they are two different things with a similar idea.

As Bitcoin was the first widely used cryptocurrency with a blockchain technology, Ethereum “borrowed” the idea of creating a new cryptocurrency but added more features. For example, Ethereum has its own browser that allows its users to search the Internet, as well as having its own payment system and a coding language. App developers are also allowed to build their apps with a blockchain technology that Ethereum provides.

The whole system is backed by volunteers that agreed to download the blockchain system and accept all the rules, for receiving awards in return. Those volunteers are called nodes.

The rules that nodes accept are controlled by smart contracts, which were created for all actions within the network that users do not put trust in. The contracts already contain all the terms that both sides agree upon. Once the terms are signed on, all actions and transactions are finalised. It is believed that these contracts will replace the ordinary contracts, as they offer free transactions and build trust between nodes and the network.

Finally, Ethereum came up with the Ethereum Virtual Machine (EVM) that allows all users to delete the code within the network if it shows to be untrustworthy. Ethereum and EVM work on different networks, which helps with the improvement of smart contracts.

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How does it work?

To use Ethereum, each user needs to have a wallet, for storing the cryptocurrency. In case of losing the private key to access the wallet, all ether will be lost with no chance of recovering the lost key, as no help desk exists.

Because of that, users can choose several options for storing their ethers:

  1. Desktop wallets
    • They run on computers.
    • Users can download a copy of the blockchain – there are several copies written in different computer languages that operate differently.
    • The whole process needs a couple of days to work, and from then on, the wallet needs to stay in sync with all transactions that were made within the network.
  1. Mobile wallets
    • Clients that mostly do transactions on the phone should consider getting a mobile wallet, as it is easier to download for smart phones, rather than having a desktop version.
    • It is more convenient for clients, but also less safe at the same time.
  1. Hardware wallets
    • Very safe because they are not connected to the Internet.
    • Do not take a lot of storage space.
    • Not convenient if users are constantly on the move.
  1. Paper wallets
    • It means literally what it says – every user has the option of simply writing down their private key on a piece of paper.
    • It is recommendable to keep the piece of paper in a safe place (a home safe for example), as well as make more copies than one that should be kept in different places.

How can an Ether be purchased?

Ethers can either be purchased in person, in cities where those transactions are popular (e.g. NY or Toronto).

The other option is to find someone to trade with online, peer-to-peer. There will be small fees for these transactions that go directly to the miners.

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