In this lecture, we analyze Ethereum
Ethereum is a digital platform for creating decentralized blockchain applications that work on the principle of smart contracts, and the Ethereum cryptocurrency itself is used as a unit of account in the platform.
A smart contract is just a code that can be executed by making a transaction to its address. When you transfer ether, information about your transaction is recorded on the Ethereum blockchain by a miner. When you add or execute smart contract code, when you add a block, the program code is executed.
The second most popular cryptocurrency was created by a Canadian programmer of russian origin Vitalik Buterin. He learned about cryptocurrencies and blockchain about two years after the launch of Bitcoin. Buterin enlisted several other specialists as co-founders of his own currency, and in the summer of 2014 the first sale of ETH tokens took place.
As a result, about $18 million was collected
Based on pre-sale data from July to September 2014 (~$0.3-0.45 per 1 ETH)
And now the entire broadcast includes 240 million
In the future, the Ethereum platform is able to decentralize many centralized systems: finance, real estate, charitable foundations, sports betting.
Almost every sector of the economy can be decentralized, and thereby make it more transparent, reduce costs, and get rid of intermediaries.
Not only the Ethereum cryptocurrency works on the Ethereum blockchain, but hundreds of others as well. The Ethereum network allows the creation of other cryptocurrencies or tokens using the same protocol as for Ethereum, but distributing them on different blockchains, which can be either public or private.
It is relatively easy and cheap to create tokens on the Ethereum platform, young projects seized on this opportunity as a way to quickly and cheaply launch their applications with original tokens and conduct ICOs.
Projects are sold by investors in the same way as companies with shares, but only for Ethereum and automatically under the terms of smart contracts, if an investor sends Ethereum to the project’s ICO wallet, then project tokens are guaranteed to be credited in return.
What is Ethereum for?
The technology is used to create:
DAO
DeFi
NFTs
DAO — decentralized autonomous organizations. In fact, these are the same organizations with the same goals that we meet in everyday life. But all the events in them are controlled not by the decision of the people appointed to manage it, but by smart contracts.
DeFi is decentralized financial services. Most often, such services are represented by trading exchanges, brokers, credit institutions or investment companies.
NFTs are non-fungible (unique) tokens. Their uniqueness lies in their value. After all, it is possible to “tokenize” not only digital art, but also the ownership of an invention, real estate, shares, bonds.
What are the main differences between Ethereum and Bitcoin?
Bitcoin is the first and most popular cryptocurrency. But that’s just cryptocurrencies.
Bitcoin operating conditions are written in the Bitcoin Script language. It is not a universal or flexible language. The code is executed once and does not affect the fate of the blockchain in the future.
Ethereum, as shown above, is a tool for creating decentralized services, which is exactly how it was conceived.
Everything works differently on Ethereum. The Ethereum Virtual Machine (EVM) is responsible for its programmability. It is a Turing complete machine, which means that all problems can be solved using only a Turing computer (or its equivalent).
Turing completeness is a fundamental concept in computer science that can be used, for example, to measure the universality of a programming language.
In the case of the blockchain, a Turing-complete machine means that, theoretically, it can perform arbitrarily complex calculations, and contracts can be executed multiple times. There is no such possibility in the Bitcoin blockchain.
If Bitcoin is capable of processing 4 transactions per second, then Ethereum is already 20 transactions per second.
In both cases, the blockchain is a ledger where information is stored. But if the Bitcoin blockchain can only store information about the ownership of the BTC cryptocurrency itself, then the Ethereum blockchain was originally created to store data of any applications.
The advantage of Ethereum is its versatility.
When Ethereum appeared, many called it the “Bitcoin killer”, perhaps Ethereum will be able to overtake the first cryptocurrency in terms of capitalization, but it will definitely not become a “killer” because it occupies its own niche in the crypto industry and is already the basic project for many other solutions.
Let’s summarize the lecture:
Ethereum is a digital platform for building decentralized blockchain applications based on smart contracts.
Smart contracts ensure that all actions are performed without human control.
The technology is used to create:
DAO
DeFi
NFTs
Ethereum is able to process transactions faster than Bitcoin.
In the next video, we will talk about stablecoins.
What is a stablecoin?
What is a stablecoin for?
How do stablecoins work?
Types of stablecoins
Pros and cons of stablecoins