The \u201cbitcoin\u201d blockchain is simply a collection of all transactions since bitcoins started, mathematically linked together to form a chain.<\/p>\n
![\"blockchains101\"](\"https:\/\/www.talkcrypto.org\/blog\/wp-content\/uploads\/2016\/06\/blockchains101-300x257.jpg\")
<\/p>\n
The blockchain also encapsulates some key concepts:<\/p>\n
- \n
- Public Key Cryptography<\/strong> (the ability to verify and authenticate a message from a sender using a set of public and private keys that are mathematically linked.<\/li>\n
- Cryptographic Hash Functions<\/strong> (a function which takes an arbitrary length input or ‘message’ and returns a fixed-size alphanumeric string, which is called the hash value – sometimes called a message digest, a digital fingerprint, a digest or a checksum)<\/li>\n
- Peer to Peer Networking<\/strong> (computing or networking through a distributed application architecture that partitions tasks or work loads between peers. Peers are equally privileged participants in the application. Devices are connected and share resources without going through a separate server computer)<\/li>\n
- Proof of Work<\/strong> (a mathematical process where obtaining the solution is random and difficult but the verification process is very straight forward)<\/li>\n<\/ul>\n
Ethereum took the blockchain concept and said:<\/p>\n
- \n
- Let\u2019s use all the great properties of the blockchain but not limit its application just to currencies.<\/li>\n
- Let\u2019s also use bitcoin\u2019s concept of multi-signature transactions (where two or more parties need to sign a transaction for the funds to be released to a third person) but expand on it\u2019s capabilities.<\/li>\n
- Let\u2019s make it open and accessible to everyone.<\/li>\n<\/ul>\n
Thus Ethereum was born.<\/p>\n
Ethereum has been described as:<\/p>\n
- \n
- \u201ca decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.\u201d – <\/em>https:\/\/www.ethereum.org<\/em><\/a><\/li>\n
- \u201cthe largest decentralized software platform that allows you to build smart contracts and distributed applications without any downtime and without any third party interference.\u201d –<\/em> https:\/\/www.quora.com\/What-is-Ethereum-in-laymans-term<\/a><\/li>\n
- \u201ca next generation platform that allows anyone \u2013 both developers and consumers \u2013 to easily take advantage of decentralized networks and realize the benefits of blockchain technology\u201d – <\/em>http:\/\/decentral.ca\/ethereum-infographic-homestead\/<\/em><\/a><\/li>\n
- \u201cWhereas Bitcoin could be described simplistically as a “Global spreadsheet”, Ethereum could be described as a “Global spreadsheet with macros.\u201d- <\/em>https:\/\/www.quora.com\/What-is-Ethereum-in-laymans-term<\/a><\/li>\n
- \u201ca new kind of law.\u201d – <\/em>http:\/\/etherscripter.com\/what_is_ethereum.html<\/a><\/em><\/li>\n<\/ul>\n
And from the creator himself, Vitalik Buterin:<\/p>\n
- \n
- \u201cIn a nutshell, Ethereum is a new innovation in computing built from technologies and concepts originally pioneered in Bitcoin.\u201d – <\/em>https:\/\/coincenter.org\/2016\/03\/what-is-ethereum\/<\/em><\/a><\/li>\n<\/ul>\n
What can Ethereum do?<\/h3>\n
Fundamentally, Ethereum (via the blockchain) is about the ability to link any piece of information to ownership and do so in a programmatical way. Some applications include:<\/p>\n
- \n
- Proof of ownership for digital content (storage & delivery)<\/li>\n
- Digital security trading (ownership & transfers)<\/li>\n
- Digital asset trading<\/li>\n
- Escrow\/Custodian services<\/li>\n
- Decentralized prediction platforms<\/li>\n<\/ul>\n
The potential applications are endless.<\/p>\n
![\"ClLfQ5NWMAA-xcE.jpg-large\"](\"https:\/\/www.talkcrypto.org\/blog\/wp-content\/uploads\/2016\/06\/ClLfQ5NWMAA-xcE.jpg-large-1024x697.jpeg\")
<\/p>\nSource: <\/em>https:\/\/letstalkpayments.com<\/em><\/a><\/p>\n
Ethereum Terminology<\/h3>\n
- \n
- Smart contracts are written in a programming language called \u201cSolidity\u201d<\/em>. A JavaScript type language.<\/li>\n
- The smart contracts are then executed on the \u201cEthereum Virtual Machine\u201d<\/em> (EVM).<\/li>\n
- Every node on the network runs an EVM.<\/li>\n
- There is a cost to running smart contracts. Each line of code cost \u201cGas\u201d<\/em> to execute.<\/li>\n
- \u201cEther\u201d <\/em>is synonymous to bitcoins. It\u2019s the cryptocurrency used within the Ethereum network.<\/li>\n
- Ether<\/em> is used to buy Gas <\/em>to power the smart contract code.<\/li>\n<\/ul>\n
There are other concepts such as Externally Owned Accounts<\/em> (EOAs) and Contract Accounts<\/em> (CA) along with messages and transactions and these represent the inner workings of a smart contract.<\/p>\n
However, as with bitcoin there are controversial teething problems. Some of the legal, ethical and operational problems are discussed here\u00a0 https:\/\/medium.com\/@pullnews\/understanding-the-dao-hack-for-journalists-2312dd43e993#.2ofyuqqfs<\/a><\/p>\n
Summary<\/h3>\n
Ethereum is a platform that allows the creation of smart contracts. The smart contracts contain rules that are executed on the decentralized peer to peer Ethereum network and is powered via it\u2019s own cryptocurrency called Ether. The potential applications are vast ranging from digital asset trading, escrow and custodian services and prediction engines.<\/p>\n","protected":false},"excerpt":{"rendered":"
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- The smart contracts are then executed on the \u201cEthereum Virtual Machine\u201d<\/em> (EVM).<\/li>\n
- Smart contracts are written in a programming language called \u201cSolidity\u201d<\/em>. A JavaScript type language.<\/li>\n
- \u201cthe largest decentralized software platform that allows you to build smart contracts and distributed applications without any downtime and without any third party interference.\u201d –<\/em> https:\/\/www.quora.com\/What-is-Ethereum-in-laymans-term<\/a><\/li>\n
- \u201ca decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.\u201d – <\/em>https:\/\/www.ethereum.org<\/em><\/a><\/li>\n
- Cryptographic Hash Functions<\/strong> (a function which takes an arbitrary length input or ‘message’ and returns a fixed-size alphanumeric string, which is called the hash value – sometimes called a message digest, a digital fingerprint, a digest or a checksum)<\/li>\n