Ethereum is in news recently. It is a cryptocurrency like Bitcoin but it is much more than just a cryptocurrency. In the simplest of terms, Ethereum is an open source platform that is based upon block chain technology. This platform can be used by developers to create and put into place decentralized applications.
It was Satoshi Nakamoto of Japan who first introduced Bitcoin in 2009. He set into motion not just a cryptocurrency but also a block chain network. Ethereum differs from Bitcoin in the sense that whereas Bitcoin is a decentralized virtual currency system and the block chain is used to register and track its transactions, the blockchain in the case of Ethereum mainly focuses upon running programming code of a decentralized application.
Like Bitcoin, there is a cryptocurrency called Ether in the system of Ethereum. The similarity between Bitcoin and Ethereum and Bitcoin ends here. Ether is a cryptocurrency that can also be used by developers to pay for services offered on Ethereum network. Cryptocurrency is only one application of block chain technology. You can understand this by comparing email with internet. Email may be very important for many people. But it is only one aspect of internet. Bitcoin has become so popular that people consider every system using blockchain technology to be the same.
Once a developer develops the code, it runs on the blockchain like a self-executing program. It is referred to as smart contract as doesn’t require any human intervention provided it meets certain conditions. These smart contracts a highly reliable and there are no chances of a fraud or interference from any third party. These contracts also do not face the problems of downtime or censorship from outside.
All systems utilizing the technology of blockchain can theoretically process codes but most of them are severely restricted in this application. This is where Ethereum scores heavily in comparison to other cryptocurrencies. Unlike other blockchain systems that allow developers to write limited number of operations, Ethereum allows a developer to write whatever programs he has in mind. This gives birth to limitless applications of the same system.
Before Ethereum arrived on the scene, developers faced a big problem when using block chain technology. Functions offered by cryptocurrency Bitcoin were very limited and it took time and effort to expand these functions and applications. They had the option of using a new blockchain platform but that was equally tedious Realizing the predicament of the developers, founder of Ethereum, evolved a new approach when he developed Ethereum.
The core innovation from Vitalik Buterin, the CEO of Ethereum, was Ethereum Virtual Machine. This is complete software that is compatible with Ethereum network and runs on it seamlessly. Using EVM, any developer can run any program created in any computer language. It is this EVM that has introduced endless possibilities for developers as they can think of many different blockchain applications now. These applications are not only easier but also more efficient than before. Developers know that they need not build a new blockchain for the creation of an application as EVM allows them to develop many different types of applications using this wonderful platform. This means there is no wastage of time and effort and new applications can be created using the same blockchain technology provided with Ethereum.
The biggest use of Ethereum lies in its ability to allow developers to create and deploy decentralized applications. Also referred to as Dapp, a decentralized application has one or the other particular purpose to serve for the users. In this sense, Bitcoin can be considered a Dapp as it enables users to indulge in electronic cash payments. The very fact that Dapp runs on a blockchain network made up of computer code means that it is not controlled or governed by a bank or government.
It is possible to decentralize any centralized service using Ethereum. There are hundreds of industries having intermediary services. All these services can be decentralized using Ethereum. If you are thinking what these intermediary services are, you can look at banks providing loans to individuals and companies. If this is highly visible, there are also intermediary services such as voting mechanism, registries of titles, and compliances required by the authorities.
Another important use of Ethereum is in the creation of decentralized autonomous organizations. You can imagine it as an organization with no central leader or command. These organizations follow not the command of a leader but the commands given by a computer code. These commands can also take the shape of smart contracts created using a block chain. This code simulates the rules and regulations of the organization and even its structure. This is a revolutionary concept that aims to create organizations of the future that will not be run by people or leaders but by computer programs. In a DAQ, ownership is decided on the basis of tokens in possession of an individual. This ownership gives people voting rights in such a decentralized organization.
There are many benefits of using a block chain based decentralized platform called Ethereum.
Immutability- no individual or organization can make changes to the data
Free from corruption and tampering-There is a general consensus on the network which is why it is not possible to amend or censor the proceedings
Highly secure-The network is highly secure through cryptography. There is no central pint that can initiate failure because of a weakness or deficiency. The system is immune form the attacks of malware and fraudulent attacks.
100% uptime-This is a big benefit as the system is never down on account of failure or maintenance.
Although there are tremendous advantages of a decentralized system like Ethereum, it is not without its own share of pitfalls. This is because of the fact that even the smart codes are after all written by human beings. Codes can develop bugs and these mistakes can be taken advantage of. Also, there is no automatic mechanism to take care of any unintended exploitation of the system. If any such scenario takes place, the only way to stop it is to get the underlying code rewritten. This vulnerability goes directly against the principle of immutability of the system.
Recently, a company based upon the concept of Decentralized Autonomous Organization of Ethereum was formed but it got hacked. This was a major setback to the concept of Ethereum and as a result there was brainstorming among the major shareholders of this system. They decided to carry out hard fork to retrieve the money of this company. This led to a split in Ethereum system with two blockchains now operating simultaneously. Despite this setback, experts believe that Ethereum is moving ahead and it has a bright future ahead. It provides a user friendly platform on blockchain technology to the people and it is being used around the world for decentralization of services.