Ethereum is a decentralized or an open software platform built on the blockchain technology which allows developers to develop and deploy decentralized apps or dapps. Being an open system implies that the system cannot be governed or controlled by the various government regulatory bodies. Ethereum is a public blockchain network but differs in technicality, purpose, and capability with other blockchain networks like Bitcoin. While the Bitcoin blockchain technology focuses on offering a peer-to-peer payment system, Ethereum focuses on running the programming code for various decentralized apps and dapps. The Ether token fuels the Ethereum blockchain network and can be used as a tradable cryptocurrency. Developers also use Ether for payment of the transaction fees as well as other services offered on the Ethereum blockchain network.
Vitalik Buterin, a programmer who was first introduced to Bitcoin development aged 17 proposed the idea of Ethereum in late 2013 as a vision to offer more than a payment system using blockchain. Through an online crowdsale which was conducted in August 2014, Buterin and other co-developers raised about $18 million to develop their vision. The network went live on July 30, 2015. The value of Ethereum reached its all-time high of over $1400 in 2017 but by the end of September 2018, the price had fallen back to around $200.
The system allows developers or participants to run blockchain-based applications known as smart contracts. A smart contract can be described as a computer node which can ease the exchange of property, money, shares, content or other aspects of value. Smart contacts running on Ethereum blockchain becomes self-operating computer programs that naturally executes after certain conditions are met.
Decentralized Autonomous Organization (DAO)
Ethereum is also used in the development of a Decentralized Autonomous Organization (DAO). This can be explained as a completely autonomous and decentralized organization without a single leader. DAO’s are operated using numerous smart contracts that are developed and written on the Ethereum blockchain. Programming codes are used to do away with the rules and structures found in a conventional organization hence no need of people and centralized control. The ownership of a DAO is given to everyone who buys tokens but instead of getting shares, the tokens are taken as contributions which offer voting rights to the contributors.
ERC20 and ERC721
Ethereum is also used as a platform to start and run other cryptocurrencies. The Ethereum network offers the ERC20 token standard that guides developers on how to implement smart contracts on Ethereum blockchain that require tokens to operationalize. Developers are at liberty to issue their own form of tokens and get funding through an initial coin offering (ICO). The Ethereum platform allows developers to raise funds by setting the amount to raise and offering it in a Crowdsale and receiving Ether in return. There have been numerous ICOs on the Ethereum blockchain in the last couple of months and one of the most prominent ones is EOS. Recently, Ethereum developed a new standard referred to as ERC721 token that can be used to track unique and valuable digital assets. Majority of new games are currently being developed utilizing this technology like the famous CryptoKitties.
Why Choose the Ethereum Blockchain?
The decentralized applications running on Ethereum blockchain benefit in various ways:
- Immutability: It is impossible for a third party to make alterations to data.
- Tamper-proof and secure: Apps cannot be censored and are secured through cryptography making it hard to hack them and preventing fraudulent activities.
- No downtime: In Ethereum, apps cannot be switched or go down.