Ethereum 101: A Brief Guide for Dummies

In its most basic form, Ethereum is an open software platform that is based on blockchain technology that lets developers to build and deploy decentralized applications.

For some, Ethereum is very much like bitcoin. However, there are some distinct differences.

Like bitcoin, Finance Brokerage Education Module Ethereum is a distributed public blockchain network. Even if there are some significant technical differences between these two, the most crucial difference to remember is that bitcoin and Ethereum differ hugely in purpose and capability.

Bitcoin vs. Ethereum

Bitcoin provides one specific application of the blockchain technology, and that’s a peer to peer electronic cash system that allows online bitcoin payments. While the bitcoin blockchain is used to track the ownership of digital currency, the Ethereum blockchain centers on running the programming code of any decentralized application.

In the realm of the Ethereum blockchain, instead of mining for bitcoin, miners work to earn Ether, which is a type of crypto token that fuels the network. Beyond a tradeable cryptocurrency, ether can also be used by application developers to pay for the transaction fees and services on the network.

Smart Contracts

Smart contract refers to a computer code that can facilitate the exchange of money, content, property, shares, or anything that has value. If you run smart contracts on the Ethereum network, they becomes self-operating computers that automatically executes when specific conditions are met.

And since these smart contracts run on the blockchain, they do so Finance Brokerage Trendline Scaling as programmed. There could be no chance for censorship, downtime, fraud, or third party interference.

While all blockchains sport the ability to process code, most of them are severely limited. For Ethereum, it’s different. Instead of the just giving a set of limited operations, Ethereum enables developers to design whatever operations they want. This means that developers can create thousands of different applications that can go beyond anything people have conceived before.

Benefits of Ethereum Decentralized Platform

Since decentralized platforms run on the blockchain, they benefit from all of its properties.

  • Immutability – this means a third party cannot make any changes to data.
  • Corruption & Tamper Proof – apps are based on a network formed around the principle of consensus. This makes censorship impossible.
  • Secure – as it’s without any central point of failure and secured cryptography, app are well protected against hacking attacks and fraudulent activities.
  • Zero Downtime – apps never go down and they can never be switched off.

Downsides of Decentralization

In spite of giving a number of great benefits, decentralized applications are not perfect. Since smart contract codes are written by humans, smart contracts therefore can only be as good as the people are tasked to write them.

Code bugs and simple oversights can lead to unintended results and adverse actions. If a mistake in the code falls in the wrong hands and it gets exploited, there’s really no efficient way in which an attack or exploitation can be halted, other than getting a network consensus and rewriting the underlying code.

That kind of scenario goes against the essence of the blockchain, which is supposed to be immutable. In addition, any action taken by a central party poses serious doubts about the decentralized nature of an application.