Consonant to the main agenda of blockchain, Ethereum aims to provide a decentralized platform which allows developers to build decentralized applications. As defined on their website, “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.”
Ethereum is the second largest cryptocurrency, only behind bitcoin, but it is more than just a peer to peer digital currency to say the least. Ethereum offers more than just a payment network to facilitate transactions, it aims to create a new internet infrastructure.
In simple words, Ethereum is like the Android Operating System. You can run numerous kinds of applications on it suiting your needs. Similarly, ethereum wants to provide a general purpose blockchain that gives developers a space to create interesting and useful applications which incorporates the idea of decentralization at its core.
Decentralized applications, commonly referred to as ‘DApps’ remove the third party interference from applications and the control resides with the users only. The idea of decentralized applications drastically improves security so as to manipulate information. A hacker would have to make the same change on every node throughout the ethereum network which is impossible. Single points of failure are eliminated and the network provides transparency and trust between parties.
BitTorrent was the first application which used this concept and allowed sharing of content over a decentralized network.
Ethereum as a currency is a misnomer, the actual currency is called ether. Ether is the fuel for ethereum network. The coin or the currency which is used on the ethereum network is called ether. It is listed as ETH. The primary purpose of ether is not to serve as a payment alternative but to incentivize developers and improve inter functionality of applications. A total of 100 million ethers were in supply as of June 2018. A block is mined every 10-12 seconds and approximately 5 ethers are generated as a reward for the miners. Currently there is no limit for the total supply of ETH but with the Ethereum network shifting to Casper (later discussed in this article) soon the rate of issuance will definitely change.
How is it different from Bitcoin?
Ether differs from Bitcoin in terms of shorter block times which directly makes transactions faster in real time. Ether’s block time is 14 to 15 seconds whereas it is 10 minutes for Bitcoin.
The mining rate is consistent in case of ethereum as compared to Bitcoin whose rate halves every 4 years. The cryptographic algorithm used in Ethereum doesn’t allow for the use of ASICs thus preventing preferential benefits to some miners only.
Transaction fees are very low and do not affect the payment as much whereas Bitcoin levies a huge amount of the transaction as fees, making it useless as a currency.
Some main features
Current mining protocols involve solving of the cryptographic puzzle using huge computational power. Immense amounts of energy and hardware power is required for this process and the power to manipulate resides with the one owning maximum hardware power. This method is called “Proof-of-work” and is hugely flawed considering it benefits the miners who can own powerful hardware, which defeats the whole purpose of decentralization. It also increases the risk of 51% attacks.
Casper project would shift the mining process from “Proof-of-work” to “Proof-of-stake” in the near future. This new approach would render the need for miners and computational powers. Proof of Stake would require validators to lock up their wealth (coins) as stake and bet on the validity of the new block. And under the Casper protocol, anyone who tries to cheat the system would have their stake slashed.
Smart contracts are programs that help in exchanging anything of value on the public Blockchain. Smart contracts execute only when the preprogrammed conditions which are agreed upon by both parties are met. The transactions are only validated if the conditions are met, eliminating the risk of corruption, failure, cheating or third party involvements. Smart contracts could change the world fundamentally. Voting, transfer of properties, record keeping and various such processes involving the exchange of value could benefit from smart contracts.
Advantages Of Ethereum:
Ethereum gives each advantage given by the blockchain technology and furthermore totally secure the intercessions of any third-party, which implies that DAO’s are implanted inside the system that can’t be controlled by anybody by any stretch of the imagination.
Any system made which is based on consensus protocols implies that to roll make an improvement in the framework or say ‘nodes’ need to concur for the change to be expert, which dispenses with the possibility of any fraud or corruption making the system tamper-proof.
The entire framework is decentralized, which implies there is no single point of failures which implies all the applications will dependably remain on the web and never turn off. Further, the decentralized nature and cryptographic security influence the Ethereum to arrange very much ensured against possible hacking attacks and fraud activities.
Disadvantages Of Ethereum:
In spite of commitments and promises made by ethereum, it’s still a question how effective the code is. There is dependably a possibility for a human mistake, and any mistake can be get exploited. By the chance, if that happens, there is no way to stop it, other then to reach the consensus and rewrite the code. Further, this conflicts with the basic idea of blockchain which states that ledger is unchangeable and immutable.
About Vitalik Buterin
Vitalik Buterin is a Russian Canadian programmer who co-founded ethereum. Buterin was 19 when he co-founded ethereum. This young skinny lad is deemed as an alien in the crypto community because of his unmatched intelligence. Vitalik started off as a content writer for a Bitcoin forum but soon got the idea of Ethereum.