Smart contracts, initial coin offerings (ICOs) and decentralized apps (dApps) are all related to Ethereum. Most people have heard about Bitcoin and a lot of them are talking a lot about the most popular cryptocurrency in the world. However, the cryptocurrency world is not only Bitcoin, there are many other cryptocurrencies out there that are worth paying attention to.
One of them is called Ethereum. The Ethereum project was born in 2014 and quickly gained a lot of sympathies in the crypto community. The founder of Ethereum is Vitalik Buterin. His idea was to create a decentralized network where everyone could build applications. This kind of internet would solve the problems of our current internet – the lack of trust. The Ethereum blockchain network developed by Buterin was designed to overcome the limitations of the transaction system of the blockchain network used by Bitcoin. Bitcoin uses the simplest function of the blockchain technology – to execute transactions. On the other hand, Ethereum offers a lot of new applications and possibilities.
Ethereum is considered to be the main platform of today’s blockchain world. It is a protocol that people can upgrade. Contrary to Bitcoin, Ethereum is a generalized blockchain network that can be used for numerous purposes. Information and transactions are still contained in blocks and the blocks are mined by the miners, but this information is not only used to send and receive transactions. Instead, it can be used for different and more complex operations. Just like with internet, Ethereum is a tool for developers and programmers.
Ethereum is known for its smart contract technology. Everyone can use them and get a decentralized and transparent way of creating and executing contracts. Smart contract is secured with cryptographic information and the information in it is applied using a programme code.
Another great feature of Ethereum are its decentralized applications (dApps). Any company can use the Ethereum’s source code and upgrade it to create its own decentralized apps based on the blockchain technology. This enables people to customize the blockchain and use it for their own needs. A decentralized app is an application whose source code is available to everyone, which means anyone can read it and verify it and it is not controlled by anyone. All the information from the app are stored in a public blockchain network. The application itself uses a token to enable the users to interact with the dApp in a decentralized manner.
The initial coin offerings (ICOs) are a new fundraising tool used by companies throughout the world to raise funds. A company creates a business project and a token on the Ethereum blockchain network. The token is offered for sale using a smart contract. Buyers buy tokens as an investment and the company gets the necessary funding for its operations.
We will give you one example how the Ethereum tools can work together. We all know how apartment rental works today. If you would like to rent out your apartment, you need to find a tenant and sign a rental contract. The contract is usually written by a lawyer and enforce in court if any side breaks the agreement. Every participant in the trial receives compensation for his services. With the Ethereum smart contracts and the digitalization of the real world, the process is less complicated and more efficient. In this case, you would use a decentralized app to rent out your apartment. Using the dApp, you would create a smart contract with all the rental terms and conditions. After executing the smart contract, you digital apartment key is transferred to the smart contract. When an interested tenant wants to rent your apartment, he or she needs to transfer the monthly rent and deposit to the smart contract. The contract then send the digital key to the tenant’s phone and he uses the key to open the apartment. In the future, you would probably have a digital key scanner on the apartment door to support this new technology. If the tenant stops paying the rent, the digital key is transferred back to you and no further actions are required. This eliminates the need for lawyers, brokers and real estate agents.
Ether is the currency of the Ethereum ecosystem. Every interaction with the Ethereum blockchain costs a certain amount and it is paid in ether. This fee is also used to reward the miners, just like in the Bitcoin network.
Ethereum shows us some of the huge potentials of the blockchain technology. Many people are already referring to the blockchain world as Internet 3.0. Bitcoin was the first messenger used to convey the idea of the blockchain technology to the world. The potentials of this new technology could revolutionize many industries and change the way we are doing business.
