What is Ethereum?
Ethereum is a global, open-source platform for decentralized applications. On Ethereum, you can write code that controls digital value, runs exactly as programmed, and is accessible anywhere in the world.
Imagine Ethereum as a supercomputer, which is run by thousands of individual around the world. Like servers run the internet right now, the Ethereum supercomputer runs a new internet.
How does it work?
The Ethereum blockchain is similar to Bitcoin, but instead of transactions, users can also upload and verify code - smart contracts. This contract, just like a legal contract, ensures certain rules in the relationship between individuals or corporations. Though instead of a signed paper, these rules are written and uploaded to the blockchain, where they are instantly accessible and verifiable to anyone in the world. No need for manual labor. And because of its open-source nature, anyone can build software to automate processes depending on the rules set in the smart contract. Let’s simplify it:
A company could create a smart contract to send a certain amount of salary to their employees at a certain date. They could write this code into a smart contract once, and anyone could be sure that the payout will happen - the employees could be sure that the company couldn’t cheat them on their hard-earned salary.
This idea of trustless automation already spreads into more advanced fields like insurance, property, financial services, legal and crowdfunding.
Learn more about Ethereum:
- A Beginner’s Guide to Ethereum Feb 23, 2017 - Linda Xie
- Video: What is Ether and Ethereum? April 25, 2019 - CME Group
- What is Ethereum? District0x
- What is Ether? Updated often - EthHub
- The Case for Ethereum Jan 30, 2018 - Elad Gil
- Blockchains: How they Work and Why they’ll Change the World Sept 28, 2017 - Morgan Peck
- Don’t let Doubts about Blockchains Close your Mind April 27, 2018 - Tyler Cowen
What are Decentralized Applications?
A normal App runs on a centralized server. A DApp (Decentralized Application) is run on the Ethereum blockchain, using smart contracts. This way, DApps can avoid any single point of failure or attack. A DApps smart contract usually rewards users who benefit their ecosystem, by giving out tokens.
Here are just a few DApps you can access with the imToken browser!
- Gitcoin, a network of incentivized open-source developers
- Cent, a social network where you earn money by posting
- CryptoKitties, a game where you collect and breed digital collectible cats
- DAI, a stable cryptocurrency that holds value at $1 USD
What are coins? What are tokens?
Just like Bitcoin, the Ethereum blockchain has its own coin, Ether (ETH). Ether gets issued to anyone who helps running the Ethereum supercomputer. Once issued, anyone can use ETH to pay for running smart contracts on the Ethereum blockchain, or to pay their friends.
Tokens are essentially like coins, but issued using Ethereum smart contracts. Which means that anyone can create a new token and use it for example to split bills with their colleagues. For these tokens, Ethereum developers created the ERC20 standard.