Ethereum Cryptocurrency Introduction

Ethereum Cryptocurrency Introduction

What is Ethereum?

In the Ethereum universe, there is a single, canonical computer (called the Ethereum Virtual Machine, or EVM) whose state everyone on the Ethereum network agrees on. Everyone who participates in the Ethereum network (every Ethereum node) keeps a copy of the state of this computer. Additionally, any participant can broadcast a request for this computer to perform arbitrary computation. Whenever such a request is broadcast, other participants on the network verify, validate, and carry out (“execute”) the computation. This causes a state change in the EVM, which is committed and propagated throughout the entire network.

Requests for computation are called transaction requests; the record of all transactions as well as the EVM’s present state is stored in the blockchain, which in turn is stored and agreed upon by all nodes. Cryptographic mechanisms ensure that once transactions are verified as valid and added to the blockchain, they can’t be tampered with later; the same mechanisms also ensure that all transactions are signed and executed with appropriate “permissions” (no one should be able to send digital assets from Alice’s account, except for Alice herself).

What is Ether?

The purpose of Ether, the cryptocurrency, is to allow for the existence of a market for computation. Such a market provides an economic incentive for participants to verify/execute transaction requests and to provide computational resources to the network. Any participant who broadcasts a transaction request must also offer some amount of ether to the network, as a bounty to be awarded to whoever eventually does the work of verifying the transaction, executing it, committing it to the blockchain, and broadcasting it to the network.

The amount of ether paid is a function of the length of the computation. This also prevents malicious participants from intentionally clogging the network by requesting execution of infinite loops or resource-intense scripts, as these actors will be continually charged.

A Compare with the Internet

All your online data – email, social media posts, photos, and even key financial information – is stored on computers/servers which are owned and managed by large and small organizations or governments. The case is the same with the various apps that you use, as your activities – like booking a cab – are tracked and recorded by the app provider.

As a user, you don’t have any control over how your personal data and records of your online activities are managed and handled by these third parties. While these organizations do specialize in securing your data, the possibility of hacks cannot be ruled out, along with the possibility of misuse and selling of data . This leads to a user’s data being “centralized” – that is, the particular organization is in command of your data. A blockchain-based platform like Ethereum attempts to address this problem of centralization by operating autonomously in a decentralized manner based on a clearly defined set of rules. It allows for a user’s data, their identities, their usage of apps, and their network activities to remain concealed to a large extent, and free from centralized control.

Ethereum is Global Super Computer?

Imagine writing your all important thesis notes on a Wordpad like mobile application or on an online web portal, and all of a sudden that app/portal is discontinued by its owner. All your important data will be gone forever. In Ethereum, one entity alone does not have control over your data and no one alone can suddenly forbid an app. Only users can make changes, and that keeps the user in full control of their data even if it is being accessed through a particular app.

Ethereum attempts to offer a decentralized and democratized solution, much like the present day Internet, but free for the pm control of any central authority. Instead of running on a few computers owned by an organization, it runs on the global network of hundreds of computers called nodes that are owned and operated by anonymous but reliable volunteers, thus creating a kind of “Global Super Computer.”

Any individual can easily join and use the various resources available on the Ethereum network, similar to using various sites and portals on the Internet or various mobile apps, with the added benefits of anonymity and decentralization. It is possible for an individual, whether tech-savvy or a complete novice, to easily build, release, run and monetize apps on the Ethereum network. One can also earn from contributing to the necessary activities, like mining, that are needed to keep the Ethereum network agile and functioning.

What are Ethereum DAPPS?

In practice, participants don’t write new code every time they want to request a computation on the EVM. Rather, application developers upload programs (reusable snippets of code) into EVM storage, and then users make requests for the execution of these code snippets with varying parameters. We call the programs uploaded to and executed by the network smart contracts.

At a very basic level, you can think of a smart contract like a sort of vending machine: a script which, when called with certain parameters, performs some actions or computation if certain conditions are satisfied. For example, a simple vendor smart contract could create and assign ownership of a digital asset if the caller sends ether to a specific recipient.

Any developer can create a smart contract and make it public to the network, using the blockchain as its data layer, for a fee paid to the network. Any user can then call the smart contract to execute its code, again for a fee paid to the network. Thus, with smart contracts, developers can build and deploy arbitrarily complex user-facing apps and services: marketplaces, financial instruments, games, etc.

Examples of Ethereum Apps

WeiFund

smart contracts based, decentralized, crowdfunding technology that runs on Ethereum. It allows contributions to be turned into contractually backed digital assets which can be used, traded or sold on Ethereum.

Provenance

makes supply chain transparent and empowers all involved stakeholders to receive real-time updates about the origin and history of products allowing consumers to make informed decisions.

Augur

enables participants to make predictions about the outcome of real-world events and be rewarded for correctly predicting one. Participants can make predictions by trading virtual shares and backing them with cryptocoins. Even the correct reporting of outcome is automatically rewarded.

Source: ethereum.org

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