Ethereum for beginners
Ethereum is different to Bitcoin.
Unlike Bitcoin, the Ethereum platform was not primarily created to send and receive cryptocurrency. Instead, Ethereum is a global, shared infrastructure that replaces centralised servers with volunteer “nodes”, that is computers, around the world.
Applications can be built more efficiently on this infrastructure without the necessity to set up independent servers, and with that creating information silos. Although information is distributed, it can only be controlled by the information owner. In some cases, the information owner may choose to keep the stored information private, prohibiting anyone else to gain access to it.
What are Ether tokens?
Ether is the native cryptocurrency of the Ethereum blockchain. It powers applications called dApps (decentralised applications). The network of distributed nodes (also known as ‘miners’) running the Ethereum blockchain get paid in Ether as a reward for ensuring all of the applications on the network run correctly.
Just like fuel in a car, Ether tokens are the ‘gas’ for the miners computation to run applications. In this way, Ether is a cryptocurrency much like bitcoin, but the network that it powers is very different.
In summary, when you buy Ether, it can be used:
Ethereum can be used in a whole host of exciting ways. Let’s have a look at two of the most significant in more detail.
Applications built on the Ethereum blockchain are called smart contracts. Smart contracts are computer code that represents ownership and transfer of information of value, such as property or money ownership and tracking financial instruments.
Since these contracts exist on a network of computers globally, they work without the need for a middleman or any other trusted third parties. The Ethereum blockchain allows for the transfer of value similar to other cryptocurrencies (such as bitcoin), but can also allow for much, much more.
Let’s illustrate this point with a few examples:
|Traditional infrastructure||Ethereum blockchain|
|Property registry records the transfer of ownership of a house when it is sold||Computer code in smart contracts transfers ownership according to set instructions|
|Funds in a trust are released at a certain date, determined by a set of contracts and held in a lawyers trust account at a bank||Computer code releases cryptocurrency locked in escrow according to an oracle input of a time/date|
Ethereum can be used to make new cryptocurrencies. These tokens are created using Ethereum smart contracts, and can be designed to represent an asset, share, or anything else. Unlike bitcoin and other more simple cryptocurrencies, the Ethereum blockchain allows for fully-programmable smart money.
Incredibly, 46 of the top 100 cryptocurrencies by market cap are based on the Ethereum blockchain.
Ethereum is a ground-breaking blockchain platform that has turned the way we think about money and value upside down.
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