What on earth is Ethereum? I mean, I keep hearing about it all the time, I’ve seen it’s the second largest cryptocurrency around but I just can’t seem to wrap my head around it. Is it as revolutionary as Bitcoin? Can it actually change the world as we know it? If you want to have a better understanding of Ethereum, but are tired of explanations that sound like complete technical gibberish, stick around… Here on Bitcoin Whiteboard Tuesday, or should I say Ethereum Whiteboard Tuesday we’ll answer these questions and more. Before we get into Ethereum we need to do a quick recap about Bitcoin, since it’s the basis from which Ethereum was born. By now you probably know that Bitcoin is a form of decentralized money, and if you still have some questions about what that means or how it works, then you might consider revisiting our original video, “what is Bitcoin”. Before Bitcoin was invented, the only way to use money digitally was through an intermediary like a bank, or Paypal. Even then, the money used was still a government issued and controlled currency. However, Bitcoin changed all that by creating a decentralized form of currency that individuals could trade directly without the need for an intermediary. Each Bitcoin transaction is validated and confirmed by the entire Bitcoin network. There’s no single point of failure so the system is virtually impossible to shut down, manipulate or control. Pretty neat huh? Well, now that we know that money can be decentralized, what other functions of society that are centralized today would be better served on a decentralized system? What about voting? Voting requires a central authority to count and validate votes. Real estate transfer records currently use centralized property registration authorities. Social networks like Facebook are based on centralized servers that control all of the data we upload to them. What if we could use the technology behind Bitcoin, more commonly known as Blockchain, to decentralize other things as well? The interesting thing about Blockchain technology is that it’s actually the by-product of the Bitcoin invention. Blockchain technology was created by fusing already existing technologies like cryptography, proof of work and decentralized network architecture together in order to create a system that can reach decisions without a central authority. There was no such thing as “blockchain technology” before Bitcoin was invented. But once Bitcoin became a reality, people started noticing how and why it works and named this “thing” blockchain technology. Blockchain is to Bitcoin what the Internet is to email; a system on top of which you can build applications and programs. A currency like Bitcoin is just one of the options. So this got people very excited, and they began to explore what else can we decentralize. However, in order for a system to be truly decentralized it needs a large network of computers to run it.Back then the only network that existed was Bitcoin and it was pretty limited. Bitcoin is written in what is known as a “turing incomplete” language which makes it understand only a small set of orders, like who sent how much money to whom. If you want to create a more complex system, you’ll need a different programming language, which means a different network of computers. Imagine for a second you wanted to build your own decentralized program, just like Bitcoin, at home. You’d need to understand how Bitcoin’s decentralization works, write code that mimics the same behaviour, get a huge network of computers to run this code and so on…. And that is a lot of work. Enter Ethereum. Ethereum was first proposed in late 2013 and then brought to life in 2014 by Vitalik Buterin who at the time was the co-founder of Bitcoin Magazine. Ethereum is the Do It Yourself platform for decentralized programs also known as Dapps - decentralized apps. If you want to create a decentralized program that no single person controls, not even you even though you wrote it, all you have to do is learn the Ethereum programming language called Solidity and begin coding. The Ethereum platform has thousands of independent computers running it meaning it’s fully decentralized. Once a program is deployed to the Ethereum network these computers, also known as nodes, will make sure it executes as written. Ethereum is the infrastructure for running Dapps worldwide. It’s not a currency, it’s a platform. The currency used to incentivize the network is called Ether but more on that later. Ethereum’s goal is to truly decentralize the Internet. Wait? The internet is centralized? I thought the Internet already was decentralized and that anyone can start their own site. While in theory that might be true, in practice Amazon, Google, Facebook, Netflix and other giants control most of the world wide web as we know it. There’s almost no activity on the web that happens without some sort of intermediary or 3rd party. But once the concept of digital decentralization was demonstrated by Bitcoin, a whole new array of opportunities became available. We can finally start to imagine and design an Internet that connects users directly without the need for a centralized 3rd party. People can “rent” hard drive space directly to other people and make Dropbox obsolete.
