This video offers an explanation of what Ethereum is and why it is so powerful.
- The emergence of blockchain owes its birth to Bitcoin. But while Bitcoin centrally focuses on sending and receiving digital currency, other solutions have emerged that use the blockchain beyond a pure payment system. One of the most popular is an open-source platform called Ethereum. It uses a cryptocurrency called ether to fund the execution of software code over a distributed peer-to-peer network.
Ethereum was proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer. Unlike the allusive Satoshi Nakamoto of Bitcoin fame, Vitalik is very much real and known. Today, he continues to develop Ethereum with the global open-source community. Ethereum's peer-to-peer network is made up of participant computers collectively called the Ethereum Virtual Machine, or EVM.
Just like Bitcoin, every computer has the complete blockchain installed. It's trustless and uses consensus and miners to add blocks. When a new transaction is added, it gets added to every computer. That's where the similarities largely end. Instead of currency as the end goal, Ethereum enables programmers using a proprietary language called Solidity to write code that is distributed across the EVM and executed under certain conditions.
In blockchain parlance, we call this code smart contracts. Smart contracts enable distributed applications known as dapps. But why code on a blockchain? Most enterprise class applications rely on expensive and redundant architecture. Everything from identity management to storage must be provided and supported. In addition, several layers of code to ensure security, scalability, and logic create cost and performance overhead.
For a developer, Ethereum provides the possibilities of a low-cost, massively scaled, and secure application platform right out of the virtual box. The EVM avoids censorship, downtime, since it can't be turned off, fraud, and third-party interference. In particular, Ethereum applications can be trustless, not relying on the attendant challenges of governing authorities.
The magic with Ethereum is that, when smart contracts are executed, there is a movement of cryptocurrency, in this case, ether that acts as a method of payment and authentication. Imagine writing an Ethereum application that enables a person to play a premium-based LinkedIn Learning training video. The code will be executed upon confirmation of ether payment. Because Ethereum uses the same cryptocurrency qualities as Bitcoin, it doesn't require any additional authentication methods, payment gateways, account management, credit cards, or complex forms.
In our example, when the smart contract conditions are met, LinkedIn gets paid, the person sees the video, and the transaction is immutably recorded and distributed to all computers on the Ethereum blockchain. Developers pay to deploy a smart contract with units called ether. Compute time on the EVM requires units called gas. Gas is a measure of the computational effort required to run some specific code.
So, when a user runs the code within a smart contract, they must make sure it has enough gas, which is paid for with ether. Finally, Ethereum miners add blocks to its distributed blockchain ledger, and get paid ether for winning the hashing problems necessary as proof of work. On remarkable consequence of smart contracts is that they can technically live forever, executing any time conditions are met. Since the value of ether fluctuates, the cost of executing a smart contract can go up or down.
In this way, a smart contract is more like a commodity. While we're still in the early days of application development, there are a number of ideas being pursued, including a voting system called Horizon State, a predication market called Augur, a live broadcasting system called Livepeer, and a system for buying and selling event tickets called EventChain. These few give us a sense of the diversity we can expect in the future.
The test environment will let you use the Ethereum network and dapps without the need to purchase and use real ether. If you're feeling confident, use the main network. You'll get the option to buy real ether and, for that, you'll need to own some Bitcoin. In order to write and deploy dapps, you'll need the Ethereum Wallet, which you can download from ethereum.org. Since programming is outside the scope of this course, I suggest checking out Blockgeeks or Gitbooks There are plenty of other free guides online.
Solidity remains a work in progress, so expect many changes ahead. Ethereum illustrates the enormous potential of blockchain technology. Rather than a technology limited to digital money, blockchain opens up a completely new way of thinking about developing, deploying, and executing software. While the future path for Ethereum and others is still somewhat unpredictable, the winners that emerge will be the creators of the next generation of the internet.
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