Currently facing its biggest challenge yet: scalability, Centralized blockchain
Dec 31, 2013
Ethereum is a decentralized platform that runs smart contracts : applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
Multifunctional as a means of payment and as a programming language, Transactions are recorded on the public digital ledger, Uses the proof-of-stake functionality, Simultaneous syncing of systems to the blockchain network
Ethereum is a platform whose blockchain’s focus is on running the codes necessary for programming any decentralized application. This platform is powered by Ether which is a blockchain-powered technology cryptocurrency. In the Ethereum blockchain, miners do not mine for Ethereum coins; rather they work to earn “Ether”, which is a crypto token that powers the network. It goes one step beyond a cryptocurrency that can only be used to trade by also being used by application developers to pay for the transaction fees incurred and other services in the Ethereum network.
All blockchains have the ability to process codes, not all can do it extensively. But the Ethereum stands out in that it is not limited to just some operations like other blockchains, it goes further by enabling developers to create any kind of operations they so ever desire. Developers can use Ethereum to create thousands of other different applications that go way beyond anything we have seen before.
Ethereum also has one important feature associated with digital currencies, the smart contract. What is a smart contract? The smart contract is a phrase used in describing computer codes that can facilitate the exchange of money, property, shares, contents and virtually anything that has value. Smart contracts ensure that once a predetermined condition is met, the corresponding clause inside the contract is fulfilled. The smart contracts run as exactly as they are programmed without any possibility of expurgation, downtime, and fraud or third-party interference. “Ethereum blockchain has some extraordinary capabilities. One of them is that you can build smart contracts. It’s kind of what it sounds like. It’s a contract that self-executes and the contract handle the enforcement, the management, performance, and payment.” Today, smart contracts can run on the public Ethereum blockchain, a distributed ledger technology that is used to keep track of all related agreements and transactions. Developers could use them to create markets, execute transactions based on agreements created long ago and keep track of pledges made by different counterparties.
Some have termed Ethereum “the next internet”. When viewed similarly, “the blockchain”, or the public, permission-less blockchain protocols could be seen as a more primitive version of what could become a mature “Internet of Value”. Such a public utility could one day provide a similarly layered architecture to expand the Internet of Information or the Internet as we know it today, to deliver all manner of financial and non-financial transactional services.
If the Internet decentralized access to information, thereby increasing access to communication tools, the vision for the blockchain is that it would decentralize, and reduce barriers to establishing trust and transacting in the digital world.
Creator and inventor Vitalik Buterin wrote: “Bitcoin was designed to be a [Simple Mail Transfer Protocol] SMTP. It’s a protocol that is very good at one particular task. It is good for transferring money, but it was not designed as a foundational layer for any kind of protocols to be built on top.” In remarks, Buterin spoke of the need for a technology that was more expansive, and that replicated the functionality of Turing-complete programming languages in a way that would be so powerful as to describe any blockchain application that could possibly be built. These are applications that rely on if-then scenarios to execute specific terms of an agreement. He later added: “Ethereum does not have features; it just has a programming language.”
Ether does not compete with Bitcoin. These two are complementary to each other within the digital ecosystem. Ether is not intended for market speculators but rather, for developers building apps on the Ethereum blockchain or users read to play with smart contracts.
How to Buy
Buying Ethereum can easily be done at Poloniex, Bithumb, Bitfinex, Kraken and many more. Once Ether has been purchased by fiat currency, the coins can be stored on the exchange or in a secured wallet. It is recommended to move large funds to a secure wallet.
The steps are also pretty simple. First, just register at an Exchange. Complete KYC (Know Your Customer) or identity checks. You would then have to choose a deposit method. These are often a mix of bank wire transfers, credit/debit card, SEPA, or PayPal payments. You can then make deposits in US Dollars, Euros, or you can check if the Exchange you are at offers deposit in your local currency. You can buy Ether afterward. Once again, it is recommended to move your funds or coins in your secure wallet.
This process will also require you to make use of an online trading platform or exchange. You can search for some by yourself through a normal internet search. But the exchange you choose will be determined by where you live, personal preference or government laws.
Some, if not all exchanges will allow you to purchase Ether directly as opposed to some other digital currencies that will require you to first buy Bitcoin and then let you swap them for Ethers.
When you have successfully cited an exchange, register and fund your account with fiat currency and you can then proceed to pay for goods and services with the Ether tokens you have acquired.
ETH, Ethereum's abbreviated currency, can be stored on cryptocurrency wallets along with other coins. There are several types of wallets and each of them have different levels of security.
Here is a quick view of wallets available:
- Paper Wallets: These wallets are one of the most secure ways to store Ethereum. These are simply private keys written down or printed out on a laminated piece of paper and locked away in a safe or hidden in a secure deposit box. You can make as many copies as you want and store them in different secured locations. The exchange for its security is its accessibility. These are used for long-term investments and to store a large amount of coins.
- Hardware Wallets: These wallets are on par with paper wallets in terms of security since they are disconnected from the Internet. These wallets are simply devices that store Ether private keys and lock it away safe. Because they are inaccessible via network, they can't be hacked. Hardware wallets are popular especially when it comes to storing large amounts of coins for safety reasons. An example of this wallet is Ledger Nano S.
- Desktop Wallets: In terms of security, this is the second (to both paper and hardware wallets) most secure type of wallet available. Their security level depends on the lengths you go into to secure your own computer. A good antivirus and firewall should be a priority before storing lots of coins on your computer. An example of this type of wallet is Coinbase Wallet. Coinbase Wallet offers a hot wallet mobile version.
Pros & Cons
- Multifunctional as a means of payment and as a programming language
- Transactions are recorded on the public digital ledger
- Uses the proof-of-stake functionality
- Simultaneous syncing of systems to the blockchain network
- Currently facing its biggest challenge yet: scalability
- Centralized blockchain