Bitcoin makes use of the blockchain technology for peer-to-peer exchange of value only. It mostly helps in the bookkeeping of financial exchanges. But the founder of Ethereum, Vitalik Buterin discovered that the blockchain technology can be used for lot more than just bookkeeping. He created the Ethereum blockchain to maximize usage of the blockchain technology. This article is the basic things you need to know about Ethereum, its features, smart contracts and DAOs. Let’s get right to it.
What is Ethereum?
Ethereum is an open source, public blockchain based distributed system computing platform featuring smart contract functionality. It is simply a distributed system that helps to perform various tasks. It was developed by Vitalik Buterin in the July 2015. The value token used in the Ethereum blockchain is called Ether.
Ethereum Vs Bitcoin
The Ethereum and Bitcoin blockchains are different in their uses. While the bitcoin was created to digitalize and decentralize money (cryptocurrencies), Ethereum is not only created to be cryptocurrency, it is seen as a computational platform to help perform tasks.
The cryptocurrency token of the Bitocin blockchain is called a bitcoin but the token of an Ethereum blockchain is called Ether.
Bitcoin uses the SHA256 algorithm while Ethereum uses an Ethash algorithm although they currently both use the Proof-Of-Work system.
The average time for creating block in the Bitcoin blockchain is 10minutes while it takes less than 20seconds to create a block on the Ethereum blockchain.
Types of Ethereum Accounts
· Externally Owned Accounts:
These are accounts that are owned by individuals or organizations. They are controlled any one with the private keys to the account.
· Contract Accounts:
These accounts contain smart contracts. They are controlled by code.
Smart contracts are simply immutable (cannot be tampered with) pieces of code that run on the network to perform a particular tasks or transactions. They act like automated agreement between the contract creator and the recipient and are present in the blockchain. It removes the traditional third entity that is normally involved work — execution.
An example is a bet between two parties. The bet (contract) is written as a code on the blockhain. Let’s assume the bet is on which candidate wins the election between Mr A and Mr B. The rewards for each outcome of the bet are also written in the blockchain. After the election, the contract executes itself and gives the reward to the winning parties based on the results of the election. The contracts are always made public to all members of the blockchain.
Smart contracts are written in a programming language called Solidity.
Ethereum gas is the execution fee that is paid by a sender for running a program on the Ethereum blockchain. Every contract has its gas limit, which is the maximum quantity of gas that can be consumed by the contract. The price for the gas is indicated by the initiator of the transaction. When the transaction starts, the gas used multiplied by the number of ethers are subtracted from the sender’s account. When the program crosses its gas limit, the rewards are given.
Decentralized Applications (DApps)
A Decentralized application consists of a set of smart contracts that operates on the data on those contracts. DApps are always open-sourced, decentralized, generates tokens and has inbuilt consensus mechanism (PoW or PoS). They enable direct interaction between the users and the providers. They comprise of various organisations that work together to create an application. These organizations are called the Decentralized Autonomous Organization (DoWs). The organizations exists entirely on the blockchain and are governed by protocols. Examples of Decentralized applications are WeiFund, 4G Capital, KYC-CHAIN and Storj.io
Through the Ethereum blockchain, we can now fully explore the various applications of the Blockchain technology. I believe we are still in the early age of this technology and Ethereum would fuel the spread and development of the technology to almost every area of our lives. I hope this article has helped you understand some basic fundamentals of the Ethereum blockchain. Stay tuned for more cryptocurrency articles.