We have heard it so many times it is the second largest cryptocurrency around. But what it exactly is and is it as revolutionary as bitcoin? Can it change the world?
If you want to understand what ethereum is and how it works in simple words without sounding in complete technical language. Stick around and we’ll explain you in a simplest way so let’s get started.
How Ethereum Started?
Before we go for ethereum let’s understand bitcoin as ethereum builds on blockchain like bitcoin but with some big differences.
Before bitcoin was emitted the only method for transaction was through intermediary like a bank. But even then the money used was still a government issued and controlled currency. And as we were introduced to bitcoin it changed everything by creating a decentralized form of currency ie., They let you use digital money without any payment providers or bank.
Any individual can directly trade without the need for intermediary. Each transaction is validated and confirmed by the entire network. No government or any company has fully control over them. Therefore this system is virtually impossible for anyone to shut down, manipulate, control or stop you from receiving your money. It is great right?
Well now that we know money can be decentralized many other functions of society that are centralized today can be better served as decentralized system like voting. Voting requires a central authority to count and validate votes.
Social network like Facebook and many other application are based on centralized service that control all the data we upload on them.
It would be so much better if we use the technology behind bitcoin also known as blockchain to decentralize other things as well. If you want to know more about blockchain click here. We have already explained about blockchain in simple words.
Blockchain to bitcoin is like internet to email, facebook etc. It is like a system on top of which you can build any application and programs.
Bitcoin is written in such a language which makes it understandable only a small set of orders like who sent how much money to whom.
If you want to create a complete system you’ll need a different programming language. So it requires a lot of work to create a huge network of computers to them. Ethereum solves this issue as it allows you to move money, make arguments directly to anyone.
It is more like a do-it-yourself platform for decentralized programs also known as DApps (Decentralized Application). Anyone can create a decentralized program that no one can control not even you. All you need to do is learn ethereum programming language Solidity and begin coding.
Ethereum has thousands of independent computers running which means it is fully decentralized. After the program runs, these computers also known as nodes will make sure it executes as written.
Ethereum is the infrastructure used for running that platform and the name of its currency is Ether. Ethereum’s goal is to decentralize the network.
Ethereum connects people directly to powerful decentralized super computers.
How Ethereum Works ?
So now that we know what it does let’s understand how it works. Ethereum like any other cryptocurrency uses blockchain technology. Ethereum’s coding language solidity is used to write Smart Contracts that are logical that runs on DApps.
In simple words, A contract is a set of If’s and Then ie., The set of conditions and action. That’s how smart contracts works.
The code written here is the law ie., A contract is the ultimate authority and nobody could overrule the contract.
Now we know what ethereum is and how it works let’s talk about it as a currency.
Ether as a currency
Ethereum’s unit of currency is called Ether. You need ether to do anything on ethereum’s network. Aside from things like reading data on the network it does not cost any ether. For example:-
If you want to send Ether to another user, it will cost some extra ether which is known as Gas Fee. Ether is also used to run DApps or smart contracts. Ether’s smallest unit is wei. It is like a cent to a dollar . One quintillion wei equals to one ether. Ether is like money in your bank account but there is some difference between ether and traditional money.
- This money is yours you can control your own funds with your wallet, no third party is needed.
- It is secured by cryptography i.e., it protects your wallet funds and transactions.
- This follows a peer-to-peer transaction system which means no medium is needed like bank, but it is secure. You can do it anytime, anywhere and with anyone.
- It is decentralized there is no central bank or organization that can decide to print more ethereum.
- It is available for everyone you just need an internet connection to accept ether.
- There is no limitation on the amount of transaction. For example:- You can send 0.000001 or 10 ether or 999999 Ether to anyone.
When people talk about the price of ethereum they are actually referring to Ether, the currency that is used to encourage people to run the ethereum protocol on their computer. In the same way bitcoin miners get paid for maintaining bitcoin’s blockchain.
Upcoming Projects and Programs:-
The first public sale for ethereum was conducted in 2014 and the cost of one ether was $ 0.40 and now on 24-03-2022 it cost over $ 3088.
Ethereum has led to creation of new products and services that can improve different areas of our lives.
We are still in early stages but there is a lot to be excited about. Like DeFi (Decentralized Finance), A more open financial system that gives you more control over your money and unlock new possibilities.
Another example is NFT (Non-Fungible Token) which has created a way to represent items as ethereum assets that can be traded and can be used as a proof of ownership. And this has created new opportunities for creators. If you want to know more about nft’s you can click here.
We hope you understand what ethereum is how it works. Comment down your thoughts below.