By market capitalization, Ethereum is the world’s second-largest cryptocurrency project, and it was the first to introduce smart contract functionality to the industry.
Ethereum is a blockchain-based software platform that is primarily used to support Bitcoin, the world’s second-largest cryptocurrency by market capitalization.
Ethereum, like other cryptocurrencies, can be used to send and receive value globally and without a third party watching or intervening unexpectedly.
The Ethereum blockchain’s primary use case today is value exchange, which is frequently accomplished through the blockchain‘s native token, ether. However, many developers are working on the cryptocurrency because of its long-term potential and the developers’ ambitious vision of using Ethereum to give users more control over their finances and online data.
The ambitious idea – which has led to Ethereum being referred to as the “world computer” – has its detractors, who believe it will most likely fail. However, if this experiment goes as planned, it will produce apps that are very different from those created by Facebook and Google, which users knowingly or unknowingly trust with their data.
Ethereum supporters want to give users control back through the use of a blockchain, a technology that decentralizes data so that thousands of people all over the world have a copy. Developers can use Ethereum to create leaderless applications, which means that the service’s creators cannot tamper with a user’s data.
Ethereum was first proposed in 2013 by Vitalik Buterin, a 19-year-old developer who was one of the pioneers of the idea of expanding the technology behind Bitcoin, blockchain, to more use cases than transactions.
While Bitcoin was designed to disrupt online banking and everyday transactions, Ethereum’s creators intend to use the same technology to replace internet third parties – those who store data, transfer mortgages, and keep track of complex financial instruments. These apps help people in a variety of ways, such as making it possible to share vacation photos with friends on social media. However, they have been accused of abusing this power by censoring data or inadvertently leaking sensitive user data in hacks, to name a few examples.
The platform went live in 2015, transforming the concept of Ethereum into a real, functioning network.
Ethereum and the concept of a decentralized internet
Before you can understand Ethereum, you should first understand what an intermediary is.
Intermediaries can be found almost anywhere these days. They assist us with a variety of digital tasks behind the scenes. Gmail, for example, assists us in sending emails. We can use Venmo to send $10 to a friend.
This means that our personal information, financial information, and so on are largely stored on other people’s computers – in clouds and servers owned by companies like Facebook, Google, and PayPal, for example.
According to proponents of decentralization, this structure can be problematic. It means less direct control for users, but it also opens up opportunities for censorship, as the intermediary can step in and prevent a user from taking any action, such as purchasing a specific stock or posting a specific message on social media, or even blocking them entirely.
Ethereum’s goal is to change the way apps work on the internet today by giving users more control by replacing intermediaries with smart contracts that execute rules automatically.
Many people, including the internet’s creators, believe the internet was always intended to be decentralized, and a splintered movement has sprung up around the use of new tools to help achieve this goal. Ethereum is one of the technologies that has decided to join this movement.
What distinguishes Ethereum from Bitcoin?
Bitcoin serves as an inspiration for Ethereum. They are both digital currencies. Ethereum employs the same technology as Bitcoin, a blockchain, which employs a shared, decentralized public ledger to decentralize the network so that it is not controlled by a single entity.
However, while Bitcoin is primarily used as a store of value, Ethereum’s goal is to decentralize other types of applications and services, ranging from social media networks to more complex financial agreements.
Why is Ethereum sometimes referred to as a “world computer”?
Many supporters see Ethereum as a “world computer” that has the potential to decentralize the internet.
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With Ethereum, centralized servers are replaced by thousands of so-called “nodes” run by volunteers all over the world, resulting in the formation of a “world computer.” The hope is that one day it will be available to anyone on the planet.
How does an Ethereum app function?
When you browse a typical app store, you’ll notice a slew of colorful squares representing everything from banking to fitness to messaging apps. The Ethereum community’s long-term goal is to create apps that look similar to these but function differently under the hood.
In short, the goal is for Ethereum apps to reclaim control of the data in these types of services.
Decentralized apps are Ethereum-based apps that provide this functionality. To use them, users must have ether, Ethereum’s native token.
What are Ethereum’s next steps?
It is worth noting that Ethereum has been met with a healthy amount of skepticism. For one thing, Ethereum is far from scalable, which means it can’t currently support a large number of users, throwing a wrench in the idea of a “world computer” that disrupts Google, Facebook, and other centralized platforms.
Ethereum 2.0, which will be released on December 1, 2020, aims to address some of these issues. Other scaling technologies, such as Raiden, which has been in development for years, could also help with the scalability issue.