Ethereum is a decentralized platform that uses blockchain technology to run smart contracts. Before we begin explaining Ethereum in detail, first let us help you understand what internet really does for you.
In today’s tech era, our personal data, financial information, and passwords are stored in large volumes on other people’s computers – in servers and clouds owned and operated by companies like Google, Amazon or even Facebook.
While this sort of setup offers a number of advantages to most organizations; from getting your data stored and secured by the team of specialists deployed by the cloud companies to reducing the costs associated with hosting and uptime to providing more time to focus on other significant tasks, let’s not forget the inconveniences it may also bring for us.
Storing your data on other’s cloud or server may trigger the vulnerability. A government or a hacker can gain access to your data without your knowledge or consent by simply attacking or influencing a third-party service, which means they can leak, steal, or even modify your important data.
Some people argue that the internet being a centralized system is actually a sin and it should have been, instead, a decentralized system. To achieve this goal, an innovative movement started off using new tools that include blockchain technology. Ethereum is one of the latest technologies to have been part of this movement that wants to be a ‘World Computer,’ aiming to decentralize the current client-server model.
What is Ethereum?
In simpler words, Ethereum is an open source software platform which uses the blockchain technology to run smart contracts, enabling developers to build and deploy decentralized applications.
Smart contract is a phrase used to describe computer programming code that can help with the exchange of money, shares, property, or anything having a value. When a smart contract is run on the blockchain, it behaves like a self-operating computer program that automatically performs when specific conditions are met. Since smart contracts run on the blockchain, they run exactly as programmed without any running possibility of third-party interference, censorship, downtime, or even fraud.
While bitcoin aims to replace online banking, PayPal, and any system involving central authority or banks, Ethereum, on the other hand, intends on using blockchain technology to replace the role of third-parties on the internet – those that are responsible for storing data, keeping track of complex financial instruments as well as transferring mortgages.
Ethereum aims to take the control of data from the internet third-parties and give it back to their owners. This way nobody would have control over your data and nobody will be able to modify your information. Only the user will be permitted to make the necessary changes, not any other entity.
Ethereum Similar to Bitcoin?
Some people believe Ethereum is similar to Bitcoin. Well, they’re similar in some ways but not identical. The only similarity between the two is being distributed public blockchain networks. What really differs them from each other is their competence and purpose.
Bitcoin goes on to provide one particular application of blockchain technology, a peer to peer electronic cash system enabling an exchange of Bitcoin payments. On one hand, Bitcoin uses the blockchain technology to track ownership of the digital currency (bitcoins), on the other hand, Ethereum makes use of the blockchain technology to focus on running the programming code of any decentralized app.
Another point that distinguishes Ethereum from Bitcoin is that in the former’s blockchain, miners, instead of mining for bitcoin, work to earn Ether, a type of cryptocurrency token responsible for ‘fueling’ the Ethereum network. Ether is also used by app developers for paying transactions fees and services on the Ethereum network.
Why Use Ethereum?
As discussed earlier, decentralized apps are made up of programming codes that run on a blockchain network, thus they can’t be controlled by any central authority or individual.
Any service that uses the centralized system can be decentralized with the help of Ethereum. We are talking about all the existing intermediary services across hundreds of different industries such as loans provided by banks and other intermediary services like voting systems, title registries, regulatory compliance, etc.
Besides, Ethereum can also be used to develop Decentralized Autonomous Organizations (DAO), which is, as its name suggests, a fully autonomous decentralized organization bearing no single leader. DAOs are run by programming codes which have been designed to replace the rules and structure of the traditional organization. DAO works independently without having the need of any human or centralized control.
Benefits of Using Ethereum
Ethereum allows developers to build and deploy decentralized applications that can run on the blockchain. Here are some of the benefits of using an Ethereum network:
- In an Ethereum network, a third-party is not allowed to make any changes to the data.
- Decentralized applications are secured using cryptography so they stay protected against the fraudulent activities and hacking attacks.
- Ethereum offers zero downtime – meaning apps can never be switched off or go down.
- Censorship is not possible in an Ethereum network as all apps are based on a network formed around the principle of consensus.