Introduction to Ethereum
Ethereum is a decentralized computing platform that generates a cryptocurrency called Ether (ETH). Programmers can write "smart contracts" on the Ethereum blockchain—self-executing agreements that automatically enforce terms based on predefined code.
Ethereum vs. Bitcoin
While often compared, Ethereum and Bitcoin serve different purposes:
- Bitcoin: A cryptocurrency and payment network enabling peer-to-peer transactions.
- Ethereum: A distributed platform for running smart contracts via the Ethereum Virtual Machine (EVM), powered by a global network of nodes.
Key Difference: Bitcoin focuses solely on payments, whereas Ethereum enables decentralized applications (dApps) through its blockchain.
Ether (ETH): The Fuel of Ethereum
Ether is Ethereum’s native cryptocurrency, used to:
- Pay node operators for hosting smart contracts.
- Facilitate transactions within dApps.
- Trade on exchanges like other cryptocurrencies.
ETH is an altcoin (non-Bitcoin crypto) supported by the Ethereum blockchain.
How Ethereum Nodes Work
- Nodes provide computational resources to the EVM.
- Developers pay ETH to execute smart contracts.
- Node operators earn ETH, similar to Bitcoin miners earning BTC.
Decentralized Applications (dApps)
Ethereum’s blockchain stores:
- ETH transaction histories.
- Smart contract code and state data.
Benefits of dApps:
- No central control: Data is distributed globally, resistant to censorship.
- Transparent execution: Contracts run exactly as programmed.
- Data security: Encrypted and immutable on the blockchain.
Smart Contracts Explained
Definition
Self-executing contracts where terms are written in code. Example use cases:
- Crowdfunding (e.g., automatic fund release upon meeting goals).
- Supply chain tracking.
- Digital ownership (e.g., CryptoKitties).
Advantages Over Traditional Systems
- No intermediaries: Eliminates fees (e.g., Kickstarter’s 5–10% cuts).
- Trustless: Code enforces agreements without third parties.
Example: CryptoKitties
- A blockchain-based game where users breed/trade digital cats.
Smart contracts handle:
- Breeding new CryptoKitties (costs ETH).
- Storing ownership records on-chain.
- No risk of loss: Unlike centralized apps, assets can’t be revoked.
FAQs
1. How is Ethereum different from Bitcoin?
Ethereum is a platform for dApps and smart contracts, while Bitcoin is purely a payment network.
2. What can ETH be used for?
Pay for transactions, deploy smart contracts, or trade as an asset.
3. Are smart contracts legally binding?
They enforce code-based terms but may not replace traditional contracts in all jurisdictions.
4. Why use dApps over regular apps?
Decentralization ensures uptime, transparency, and user control over data.
5. What’s the cost to run a smart contract?
Fees depend on computational complexity, paid in ETH (called "gas").
Conclusion
Ethereum revolutionizes digital agreements by combining blockchain security with programmable contracts. From decentralized finance (DeFi) to NFT platforms like CryptoKitties, its applications are vast and growing.