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About Ethereum

 

Understand

Ø What is Ethereum?

Ø Why do you need Ethereum?

Ø History of Ethereum

Ø What is Smart Contract?

Ø Smart Contract vs Traditional Contracts

Ø Ethereum Key Terms

Ø Ethereum vs. Bitcoin

Ø Advantages of Ethereum

Ø Disadvantages of Ethereum

 

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What is Ethereum?

·      Ethereum is an open-source operating system that offers smart contract functionality.

·      It is a distributed computing platform that supports developing decentralized Digital Applications (DApps) using blockchain technology.

·      Ethereum provides a decentralized virtual machine called Ethereum Virtual Machine (EVM) that can run scripts using an international network of public nodes.

·      Ethereum is the biggest decentralized software app.

·      It helps you to build smart contracts and decentralized applications without any downtime or any third-party interference.

·      Ethereum allows the developer to create and publish next-generation distributed applications.

 

Why do you need Ethereum?

·      Centralized systems are one of the most widespread models for software applications.

·      This system directly controls the operation of the individual units and the flow of information from a single center.

·      In this kind of system, individuals are depended on the central power to send & receive information.

However, there are issues with the centralized system are:

• Single point of control & failure
• It can be corrupt easily
• Performance bottleneck

The Solution is Decentralized Applications

Ø Decentralized applications never reply on a centralized backend, but they interact directly with a blockchain.

Ø The term DApp is a combination of two words- decentralized applications. In simple words, it is an application, tools, or programs that work on the decentralized Ethereum Blockchain.

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History of Ethereum

• 2013: Vitalik Buterin, a developer who was involved in Bitcoins, and he was first to describe on paper
• 2014: A Swiss firm Ethereum Switzerland Gmbh developed the first Ethereum software project
• 2015: Frontier, the first version of Ethereum was launched.
• On March 14, 2016: A planned protocol Homestead becomes second biggest version upgrade of the ethereum network.
• On May 2016: Ethereum gets the most extensive media coverage when the DAO raised a record $150 million in crowd sale.
• On July 2016: The network branched into two broad categories: Ethereum (ETH) and Ethereum Classic (ETC).
• June 2017: Ethereum rallies above $400 recording a 5001% rise since Jan 1^st, 2017
• May 2017- Ethereum will eventually overtake the success of Bitcoins
• June 2018- The DAO was hacked by an anonymous group claiming $50 worth of ETH.

 

What is Smart Contract?

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A Smart Contract is a computer program that executes automatically.

It is a transaction protocol that allows blockchain users to exchange money and property.

It also helps users to perform actions like voting without any central authority.

It is a virtual third-party software agent that can automatically execute and enforce terms and actions according to the legal agreement.

 

Smart Contract vs Traditional Contracts

 

·         Smart contracts are a self-executing computer program, while traditional contracts are bound by the legal terms.

·         Smart contracts cannot be modified or changed according to people’s will, while traditional contracts are flexible and can be modified at any time with the consent of both the parties.

·         Smart Contracts work on the distributed ledger technology, while Traditional contracts work on the institutional factors and requirements of the two parties involved.

·         Smart contracts cannot be manipulated or tampered with, while traditional contracts can be manipulated and changed easily.

·         Smart contracts limit human interaction and interference while traditional contracts need human intervention.

 

Ethereum Key Terms

·         Currency Issuance: It is mostly managed and monitored by a country's central bank. It is also referred to as a monetary authority.

·         Decentralized Autonomous: Decentralized Autonomous Organization is a digital organization which aims to operate without the need for hierarchical management.

·         Organizations (DAO): DAO is a combination of computer code, a blockchain, smart contracts, and people.

·         Smart Contracts: It is digitally signed agreement between two or more parties which relies on a consensus system

·         Smart Property: The Ethereum Wallet is a gateway to decentralized applications on the Ethereum blockchain. It helps you to hold and secure ether and other crypto-assets which are built on Ethereum.

·         Solidity: Solidity is the smart contract language used in Ethereum. It is general purpose programming language developed to run in the EVM environment. Solidity helps you to perform arbitrary calculations. However, it aims to send & receive digital token and store states.

·         Transactions: A transaction is a message which is sent from one account to another account that might be the same or empty. It can include binary data which is called Ether.

·         Ethereum Virtual Machine: The Ethereum Virtual Machine which is also known as EVM is the runtime environment for smart contracts. EVM is a computer layer straight above the underlying hardware. It is not just sandboxed but isolated. Moreover, the code running inside the EVM doesn't have any access to network, filesystem or any other processes.

 

Ether

ü Ether is a value token of the Ethereum blockchain.

ü It is listed as "ETH" on cryptocurrency exchanges.

ü It helps you to pay transaction fees and computational services on the Ethereum network.

ü In the Ethereum network whenever the contract is executed, Ether is paid.

Gas

§  To perform a transaction on the Ethereum network, a user requires to make a payment (to the miner) Ether via an intermediary token called 'Gas.'

§  It is a unit which allows you to measure the computational work required for running a smart contract or other transactions.

§  In Ethereum, the transactions fee is calculated in Ether, which is given as:

 

o   Ether = Tx Fees= Gas Limit * Gas Price

Where,

• Gas Limit= Refers to the amount of gas that is used for the computation

• Gas Price= The amount of Ether a user is required to pay

Ethereum vs. Bitcoin

 

Applications Ethereum

• Banking: With Ethereum's decentralized system. It is almost impossible for a hacker to have unauthorized access to an individual's personal information.

• Agreements: By using a smart contract, agreements can be maintained and executed without any alteration.

• Prediction market: The prediction market is another wonderful use case of Ethereum Smart Contract. The platforms like Gnosis and Augur use Ethereum for this purpose.

• Digital Identity Management: Digital identities can be managed by using smart contracts which solve the major issues of identity theft and data monopoly.

 

Advantages of Ethereum

• Allows to upload and request programs to be executed:
• 100% uptime and DDOS resistant.
• Ethereum helps to create a tradable token that you can use as a new currency or virtual share.
• Persistent and permanent data storage
• Build virtual organizations
• Helps you to develop decentralized applications
• Ethereum helps you to build fault-tolerant and highly secure decentralized apps.

Disadvantages of Ethereum

• The Ethereum Virtual Machine is slow, so you can't use it for large computations.
• Storage on the blockchain is expensive.
• Swarm Scalability is an issue, so there is a trade-off with decentralization Private block chains are likely to proliferate.
• Fixing bugs or updating Apps is a tough task because every peer in the network need to update their node software.
• Some applications require verification of user identity, and as there is no central authority to verify the user identity.