Why Do You Need Bitcoin Or Ethereum To Buy Other Cryptocurrency? – What in the world is Ethereum I mean I keep hearing about it all the time I have actually seen it’s the 2nd biggest cryptocurrency around, but I just can’t seem to wrap my head around it.
Is it as innovative as Bitcoin? Can it actually change the world as we understand it If you want to have a better understanding of Ethereum, however are tired of explanations that sound like total technical gibberish, stay … Here on Bitcoin, Whiteboard Tuesday, or ought to I say, Ethereum, Whiteboard Tuesday, we’ll respond to these concerns And more.
Before we enter Ethereum, we require to do a quick wrap-up about Bitcoin given that it’s the basis from which Ethereum was born.
By now you most likely know that Bitcoin is a type of decentralized cash, and if you still have some concerns about what that implies or how it works, then you might consider reviewing our original video “what is Bitcoin”.
Before Bitcoin was developed.
The only method to utilize cash digitally was through an intermediary like a bank or Paypal.
Even then, the money used was still a federal government released and controlled currency.
Bitcoin changed all that by creating a decentralized type of currency that people could trade directly without the requirement for an intermediary.
Each Bitcoin transaction is validated and confirmed by the entire Bitcoin network.
There’s, no single point of failure, so the system is practically impossible to close down, control or manage.
Pretty cool huh Well now that we understand that cash can be decentralized.
What other functions of society that are centralized today would be better served on a decentralized system.
What about voting Voting needs a central authority to count and verify votes.
Realty transfer records currently use centralized residential or commercial property registration.
Social networks like Facebook are based on central servers that manage all of the data we submit to them.
What if we might utilize the innovation behind Bitcoin, more frequently called Blockchain to decentralize other things as well.
The intriguing aspect of Blockchain innovation is that it’s, really, the by-product of the Bitcoin innovation.
Blockchain innovation was created by merging currently existing technologies like cryptography proof of work and decentralized network architecture together in order to create a system that can reach choices without a main authority.
There was no such thing as “blockchain technology” before Bitcoin was created.
But once Bitcoin became a reality, people began noticing how and why it works, and called this “thing” blockchain technology.
Blockchain is to Bitcoin what the Internet is to email, a system on top of which you Can construct programs and applications.
A currency like Bitcoin is just among the options.
This got people really fired up and they started to explore.
What else can we decentralize.
However, in order for a system to be really decentralized? It requires a large network of computers to run it.
The only network that existed was Bitcoin and it was pretty restricted.
Bitcoin is written in what is called a “turing incomplete” language, that makes it understand only a little set of orders like who sent how much cash to whom.
If you want to create a more complex system, you’ll require a various programs language, which suggests a different network of computers.
Picture for a 2nd.
You wanted to construct your own decentralized program, just like Bitcoin at home.
You ‘D need to understand how Bitcoin’s decentralization works.
Write code that simulates the exact same behaviour, get a substantial network of computer systems to run this code and so on … And that is a lot 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, likewise referred to as Dapps decentralized apps.
If you want to develop a decentralized program that no bachelor controls, not even you, although you wrote all of it you have to do, is find out the Ethereum programming language called Solidity and start coding.
The Ethereum platform has thousands of independent computer systems running it, meaning it’s totally decentralized.
When a program is deployed to the Ethereum network, these computer systems, also called nodes, will make certain it performs as written.
Ethereum is the infrastructure 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 objective is to truly decentralize the Internet.
The web is centralized.
I believed the Internet already was decentralized which anybody can begin their own site.
, While in theory that might be real in practice: Amazon, Google, Facebook, Netflix and other giants manage.
The majority of the web, as we know, it.
There’s, practically no activity on the internet, that happens without some sort of intermediary or 3rd party.
, But when the concept of digital decentralization was demonstrated by Bitcoin a whole brand-new array of opportunities appeared.
We can finally begin to imagine and create an Internet that connects users straight without the requirement for a centralized 3rd party.
Individuals can “rent” hard drive area straight to other individuals and make Dropbox outdated.
Motorists can provide their services straight to guests and eliminate “Uber” as the Middleman.
Individuals can purchase cryptocurrencies straight from one another without the requirement for an exchange that can get hacked or steal.
Your cash. Why Do You Need Bitcoin Or Ethereum To Buy Other Cryptocurrency?
Ethereum enables individuals to link directly with each other without a main authority to look after things.
It’s, a network of computer systems that together combine into one effective, decentralized, supercomputer.
Ok, So now you know what Ethereum does, however we haven’t 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 explain:.
In real life, all a contract is is a sets of “Ifs” and “Thens”.
Meaning a set of actions and conditions.
For instance, if I pay my landlord $ 1500 on the 1st of the month, then he lets me use my house.
That’s precisely how smart contracts work on Ethereum.
Ethereum designers compose the conditions for their program or Dapp, and then the ethereum network executes it.
Since they deal with all of the aspects of the agreement enforcement management, efficiency and payment, they are called smart contracts.
For instance, if I have a wise contract that is utilized for paying lease, the property manager does not need to actively gather the money.
The agreement itself, “understands”.
If the money has actually been sent out.
I will be able to open my apartment or condo door if I certainly sent the cash.
If I missed my payment, I will be locked out.
Wise contracts also have their downsides.
Going back to my previous example.
Instead of having to toss out an occupant that isn’t paying a “wise” contract would lock the non-paying occupant out of their home.
A truly smart contract, on the other hand, would take into consideration other aspects too, such as extenuating scenarios, the spirit with which the agreement was written, and it would likewise have the ability to make exceptions if warranted.
Simply put, it would act like a really great judge.
Rather, a “clever contract” in the context of Ethereum is not smart at all.
It’s, in fact uncompromisingly letter strict.
It follows the rules down to a T and can’t take any secondary factors to consider or the “spirit” of the law into account like what commonly happens with real world contracts.
Once a clever contract is released on the Ethereum network, it can not be modified or corrected even by its original.
The only way to alter this agreement would be to persuade the entire Ethereum network that a modification need to be made which’s virtually impossible.
This creates a really serious problem since, unlike Bitcoin Ethereum was built with the ability to produce really complex agreements and complex agreements are really challenging to secure.
With any contract the more complicated it is, the harder it is to implement as more space is left for analyses Or more provisions need to be composed to handle contingencies.
With wise contracts.
Security indicates handling with best accuracy every possible method which an agreement could be executed in order to make sure that the agreement does only what the author planned.
Ethereum released with the concept that “code is law”.
That is an agreement on Ethereum, is the ultimate authority And nobody could overrule the contract.
Well that all pertained to a crashing halt when the DAO event, happened.
“Dow” or DAO, represents “Decentralized Autonomous Organization”, which permitted users to deposit money and get returns based on the financial investments that the DAO made.
The choices 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 resulted in somebody determining a method to drain the DAO out of money.
Now you could state 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 clever contract.
This isn’t extremely various than a creative legal representative, determining a loophole in the present law to effect a favorable outcome for his client.
What occurred next is that the Ethereum neighborhood decided that code no longer is law and changed the Ethereum guidelines in order to revert all the money that went into the DAO.
In other words, the agreement, investors and writers did something stupid and the Ethereum developers decided to bail them out.
The small minority that didn’t concur with this relocation adhered to the original Ethereum Blockchain prior to its procedure was modified and that’s how Ethereum Classic was born, which is Actually, the initial Ethereum.
We’ve covered a lot up until now, and the last thing I want to discuss is Ethereum as a currency.
We’ve already established, that Ethereum is generally a large bunch of computer systems collaborating like one extremely computer system, to perform code that powers Dapps.
This expenses money Money to get the makers to power them up, store them and cool them.
, if required.
That’s why Ether was developed.
When people discuss the rate of Ethereum, they in fact are describing Ether the currency that incentivizes individuals to run the Ethereum protocol.
On their computer system.
This is really similar to the way Bitcoin miners make money for maintaining the Bitcoin blockchain.
In order to release a wise 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 individuals will write optimized and efficient code and won’t waste.
The Ethereum network computing power on unnecessary jobs.
Ether was first dispersed in Ethereum’s original Initial Coin, Offering back in 2014.
Back then it cost around 40 cents to purchase one Ether.
Today, one Ether is valued in hundreds of dollars, because the use of the Ethereum network has actually grown exceptionally 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 an entire new rabbit hole that we’ll cover, but I believe this will do for now as an intro to Ethereum.
This concludes today’s episode of Ethereum Whiteboard Tuesday.
Ideally, by now you have a better understanding of what Ethereum is A network of computers working together to replace the centralized design of programs and companies which run the Internet today. Why Do You Need Bitcoin Or Ethereum To Buy Other Cryptocurrency?