Ethereum is all about re-imagining how the internet works. Buying things, building apps, storing records: Ethereum wants to change all of that. Our super simple guide will help you understand Ethereum’s big idea and the role Ether plays in that vision.
What is Ethereum?
If Bitcoin is the floppy disk of blockchain, Ethereum is the CD: it’s an evolution of the technology. What bitcoin proved was that a currency could be created by a community, and sent and received by anyone with a cryptocurrency wallet. It also solved the rather tricky double spending issue.
Ethereum is a network that wants to change how companies work on the internet. Ether on the other hand, is the cryptocurrency Ethereum uses to build and maintain its network.
What Ethereum has proven however, is that blockchain can be so much more than just a store of value. It can be used to organize people, ideas, companies, money, services, you name it. If anything can be written into code and used by a smart contact it can be built on Ethereum.
This simple idea has allowed companies to use Ethereum to manage property, shares, contracts, play games, and even build your own nation. We did a deep dive into one such project to help a Native Indian tribe build its own blockchain state.
Did you know?
Ether’s sub-units, Gwei and Wei are named after Wei Dai, an early pioneer of cryptocurrencies.
Who Invented Ethereum?
A Russian/Canadian computer programmer called Vitalik Buterin wrote the white paper Ethereum is based on. However, the building of the network and community was helped along by co-founders: Anthony Di Loria, Charles Hoskinson, Miha Alisie, Amir Chetrit, Joseph Lubin and Gavin Wood.
A brief history of Ethereum
- 2013 – Vitalik Buterin produces a white paper explaining the concept of Ethereum
- January 2014 – Ethereum is publicly announced
- July 2014 – Ethereum launches an ICO using Bitcoin to buy Ether
- June 2016 – $50 million of Ether was stolen from a crowdsale and Ethereum developers agree to reverse the decision by creating a ‘hard fork’ – read about what a fork is.
- March 2017 – a group of companies including Toyota, Samsung, Microsoft, Intel, and J.P. Morgan establishes the Enterprise Ethereum Alliance, a non-profit designed to make Ethereum suitable for big business.
What’s so special about it?
Ethereum is taking the technology Bitcoin is built on and making it more than just a currency. It allows developers to build apps – they’re called Dapps or ‘distributed apps’ in the Ethereum world – which bundle those smart contracts together into an easy-to-use interface. We’ve written an article exploring smart contracts and Dapps in more detail.
You can even build your own currency on top of Ethereum. We’ve written an article exploring Ethereum’s currencies within currencies
If Bitcoin is the gold of the cryptocurrency world, Ethereum is the oil that machines are powered on.
Did you know?
Vitalik Buterin came up with the name Ethereum after browsing Wikipedia articles about elements and science fiction.
What is Ether and How is Ether produced?
Ethereum is a network that wants to change how companies work on the internet. Ether on the other hand, is the cryptocurrency Ethereum uses to build and maintain its network. In a similar way to how Bitcoin works, miners create Ether by creating blocks and solving puzzles. This technique, known as mining, is explained more fully in our guide to mining.
Roughly every 15 seconds, a new block is added to the Ethereum blockchain, with the computer or miner that solves the puzzle at the heart of the block being rewarded with Ether.
Ethereum currently uses the same mining technique as Bitcoin, however, it has plans to move to a different technique. We’ve done a whole article explaining this change called proof of work vs proof of stake.
How do you get hold of Ether?
You can buy Ether on an exchange, or you can become a miner yourself!
What can you do with Ethereum?
Lots of things!
- Social Networks – Get paid for your posts on social media.
- File Storage – Decentralised file storage as a fraction of the price.
- Overseas Payments – Dramatically reducing the cost of sending cash overseas.
- Payments Cards – Contactless debit card to pay in Ethereum and other cryptocurrencies.
- Online advertising – Cutting out the middlemen in online ads. Users get paid directly for watching online advertisements.
- Loans – Blockchain backed loans with no credit checks.
A lot of these ideas are still in their early stages, but the way Ethereum is built, all of these ideas are completely possible.
Did you know?
Unlike Bitcoin, Ethereum has no limits to how much Ether can be produced
Ethereum wants to be the platform that all decentralized apps get built on. However, it has been experiencing a few growing pains. One of the biggest has been transaction speeds. In order for Ethereum to become the network all decentralized companies are built on, it has to be able to allow more transactions to happen at once. At present it handles rather 15 transactions per second, whereas Visa can handle up to 24,000, so it has a long way to go.
Another challenge Ethereum faces is from other networks such as EOS, NEO and Tron to name but a few. These networks are all trying to increase speed, without compromising on security. Whoever cracks that first will unlock the decentralized future.