Why Bitcoin And Not Ethereum – What on earth is Ethereum I indicate I keep becoming aware of it all the time I have actually seen it’s the 2nd largest cryptocurrency around, but I simply can’t appear to wrap my head around it.
Is it as revolutionary as Bitcoin? Can it really change the world as we understand it If you want to have a better understanding of Ethereum, but are tired of explanations that sound like complete technical gibberish, stay … Here on Bitcoin, Whiteboard Tuesday, or must I say, Ethereum, Whiteboard Tuesday, we’ll address these questions And more.
Prior to we enter Ethereum, we need to do a fast recap about Bitcoin since it’s the basis from which Ethereum was born.
By now you most likely understand that Bitcoin is a type of decentralized money, and if you still have some questions about what that implies or how it works, then you might think about reviewing our original video “what is Bitcoin”.
Prior to Bitcoin was invented.
The only way to utilize cash digitally was through an intermediary like a bank or Paypal.
Even then, the cash used was still a government issued and regulated currency.
However, Bitcoin changed all that by producing a decentralized type of currency that individuals could trade directly without the requirement for an intermediary.
Each Bitcoin transaction is validated and verified by the entire Bitcoin network.
There’s, no single point of failure, so the system is practically impossible to shut down, control or manage.
Pretty cool huh Well now that we know that money can be decentralized.
What other functions of society that are centralized today would be much better served on a decentralized system.
What about voting Voting needs a central authority to count and validate votes.
Realty transfer records currently use centralized residential or commercial property registration.
Social media like Facebook are based on centralized servers that control all of the information we upload to them.
What if we might use the technology behind Bitcoin, more frequently known as Blockchain to decentralize other things too.
The intriguing aspect of Blockchain technology is that it’s, really, the by-product of the Bitcoin invention.
Blockchain innovation was produced by merging already existing technologies like cryptography evidence of work and decentralized network architecture together in order to create a system that can reach choices without a central authority.
There was no such thing as “blockchain technology” before Bitcoin was created.
But once Bitcoin became a reality, people began observing how and why it works, and named this “thing” blockchain innovation.
Blockchain is to Bitcoin what the Internet is to email, a system on top of which you Can build programs and applications.
A currency like Bitcoin is just among the alternatives.
So this got individuals really fired up and they started to explore.
What else can we decentralize.
Nevertheless, in order for a system to be truly decentralized? It requires a big network of computers to run it.
Then, the only network that existed was Bitcoin and it was quite restricted.
Bitcoin is written in what is known as a “turing incomplete” language, that makes it understand only a small set of orders like who sent out just how much money to whom.
If you want to produce a more complex system, you’ll need a different programming language, which suggests a various network of computers.
Think of for a second.
You wished to build your own decentralized program, just like Bitcoin in the house.
You ‘D require to understand how Bitcoin’s decentralization works.
Compose code that mimics the very same behaviour, get a big network of computers to run this code and so on … And that is a great deal of work.
Ethereum was first proposed in late 2013 and after that brought to life in 2014 by Vitalik Buterin, who at the time was the co-founder of Bitcoin Magazine.
Ethereum is the Do It Yourself platform for decentralized programs, also known as Dapps decentralized apps.
If you want to develop a decentralized program that no bachelor controls, not even you, despite the fact that you composed everything you need to do, is discover the Ethereum programming language called Solidity and start coding.
The Ethereum platform has countless independent computers running it, implying it’s completely decentralized.
As soon as a program is released to the Ethereum network, these computers, also called nodes, will make sure it performs as written.
Ethereum is the facilities for running Dapps worldwide.
It’s, not a currency, it’s, a platform.
, The currency used to incentivize the network is called Ether, however more On that, later.
Ethereum’s goal is to truly decentralize the Internet.
The internet is centralized.
I believed the Internet already was decentralized which anyone can start their own website.
, While in theory that might be true in practice: Amazon, Google, Facebook, Netflix and other giants control.
The majority of the web, as we know, it.
There’s, nearly no activity on the web, that occurs without some sort of intermediary or 3rd party.
, But when the concept of digital decentralization was demonstrated by Bitcoin a whole new variety of opportunities became available.
We can lastly start to imagine and create an Internet that connects users directly without the need for a centralized 3rd party.
Individuals can “rent” hard disk drive space directly to other people and make Dropbox outdated.
Drivers can provide their services straight to passengers and eliminate “Uber” as the Middleman.
Individuals can buy cryptocurrencies directly from one another without the need for an exchange that can get hacked or steal.
Your money. Why Bitcoin And Not Ethereum
Ethereum allows individuals to link straight with each other without a main authority to look after things.
It’s, a network of computers that together combine into one powerful, decentralized, supercomputer.
Ok, So now you understand what Ethereum does, however we have not touched upon HOW it does it.
Ethereum’s coding, language Solidity is used to write “Smart Contracts”.
That are the reasoning that runs Dapps.
Let me describe:.
In reality, all an agreement is is a sets of “Ifs” and “Thens”.
Suggesting a set of actions and conditions.
For example, if I pay my property owner $ 1500 on the 1st of the month, then he lets me utilize my home.
That’s exactly how clever agreements work on Ethereum.
Ethereum developers write the conditions for their program or Dapp, and then the ethereum network executes it.
Due to the fact that they deal with all of the aspects of the contract enforcement performance, management and payment, they are called clever contracts.
For example, if I have a wise agreement that is used for paying rent, the landlord doesn’t require to actively gather the cash.
The contract itself, “knows”.
If the cash has actually been sent out.
I will be able to open my home door if I indeed sent out the money.
If I missed my payment, I will be locked out.
However, smart contracts also have their downsides.
Returning to my previous example.
Instead of having to kick out an occupant that isn’t paying a “wise” agreement would lock the non-paying occupant out of their apartment.
A really intelligent agreement, on the other hand, would take into consideration other elements as well, such as extenuating circumstances, the spirit with which the contract was composed, and it would likewise be able to make exceptions if required.
Simply put, it would act like a really good judge.
Rather, a “clever contract” in the context of Ethereum is not intelligent at all.
It’s, actually uncompromisingly letter rigorous.
It follows the rules to a T and can’t take any secondary considerations or the “spirit” of the law into account like what commonly happens with real world contracts.
As soon as a smart agreement is released on the Ethereum network, it can not be modified or remedied even by its initial.
The only method to alter this agreement would be to persuade the entire Ethereum network that a change must be made and that’s virtually difficult.
This develops a really major issue given that, unlike Bitcoin Ethereum was built with the ability to create really intricate contracts and intricate agreements are extremely hard to secure.
With any agreement the more complex it is, the harder it is to impose as more room is left for interpretations Or more provisions should be written to handle contingencies.
With wise agreements.
Security means managing with best accuracy every possible method which an agreement could be executed in order to ensure that the contract does only what the author planned.
Ethereum introduced with the idea that “code is law”.
That is a contract on Ethereum, is the supreme authority And nobody might overrule the agreement.
Well that all came to a crashing halt when the DAO occasion, occurred.
“Dow” or DAO, stands for “Decentralized Autonomous Organization”, which enabled users to deposit cash and get returns based on the financial investments that the DAO made.
The decisions themselves would be.
Crowd-Sourced and decentralized.
The DAO raised $ 150M in Ethereum currency ether, when ether was trading around $ 20.
While this all sounded excellent, the code wasn’t protected extremely well and led to somebody finding out a method to drain the DAO out of cash.
Now you might say that the person who drained the DAO was a “hacker”.
However some would argue that this was just somebody who was making the most of the loopholes he found in the DAO’s smart agreement.
This isn’t extremely different than an imaginative attorney, determining a loophole in the existing law to effect a positive outcome for his customer.
What occurred next is that the Ethereum neighborhood chose that code no longer is law and changed the Ethereum guidelines in order to revert all the money that entered into the DAO.
Simply put, the contract, authors and financiers did something silly and the Ethereum designers chose to bail them out.
The small minority that didn’t concur with this move stayed with the original Ethereum Blockchain before its protocol was altered which’s how Ethereum Classic was born, which is Actually, the initial Ethereum.
We’ve covered a lot up previously, and the last thing I want to discuss is Ethereum as a currency.
We’ve already established, that Ethereum is generally a big bunch of computer systems interacting like one super computer system, to carry out code that powers Dapps.
However, this costs money Money to get the makers to power them up, save them and cool them.
, if required.
That’s why Ether was invented.
When people discuss the cost of Ethereum, they actually are referring to Ether the currency that incentivizes people to run the Ethereum procedure.
On their computer.
This is really similar to the way Bitcoin miners make money for keeping the Bitcoin blockchain.
In order to deploy a clever contract to the Ethereum platform, its author should pay to do so.
That payment is made in the form of ether.
This is done so that people will compose optimized and efficient code and will not lose.
The Ethereum network calculating power on unneeded tasks.
Ether was first distributed in Ethereum’s original Initial Coin, Offering back in 2014.
At that time it cost around 40 cents to purchase one Ether.
Today, one Ether is valued in numerous dollars, given that making use of the Ethereum network has actually grown profoundly due to the ICO hype that began in 2017.
Still Confused Don’t worry, we’ll get more into Ether and mining in a later on.
Ethereum’s network and Ether are a whole new rabbit hole that we’ll cover, but I believe this will provide for now as an intro to Ethereum.
This concludes today’s episode of Ethereum Whiteboard Tuesday.
Ideally, by now you have a much better understanding of what Ethereum is A network of computer systems interacting to replace the centralized design of programs and business which run the Internet today. Why Bitcoin And Not Ethereum