The Ethereum - ETH cryptocurrency

Ethereum is a decentralised system that is free from government control. The majority of online services and businesses are built on a centralised system. This system has been used for many years, and while history has proven that it isn't perfect, its implementation is still necessary when parties don't trust each other.

A centralized approach means control by a single entity, but also a single point of failure, which makes applications and online servers using this system extremely vulnerable to hacker attacks and power outages. Additionally, most social networks and other online servers require users to provide at least some degree of personal information, which is stored on their servers. From there, they can easily be stolen by the company itself, by dishonest employees, or by hackers.

Ethereum is decentralised and completely self-contained, so the system has no central point of failure, as it is run by thousands of computers around the world, which means it can never go offline. In addition, users' personal information remains on their own computers, while content and applications remain under the full control of their creators without having to obey any rules imposed by third-party services.

Ethereum and Bitcoin are two completely different projects, with equally different goals. Bitcoin is the very first cryptocurrency and the first money transfer system, built and supported by a public ledger (the blockchain).

Ethereum borrowed upon Bitcoin's technology and greatly expanded its capabilities. It is an entire network, with its own internet browser, its own coding language and its own payment system. More importantly, it allows users to build decentralised applications on the Ethereum blockchain.

This essentially eliminates intermediaries and all the costs associated with the intervention of third parties. For example, the only profit that comes from users who "like" and "share" their favorite musicians' posts on Facebook is generated by an advertisement placed on their page and which goes directly to Facebook. In an Ethereum version of this social network, artists and the public would receive prizes for their positive communication and support. Similarly, in a decentralised version of Kickstarter, you would not only receive an artifact for your contribution to the company, but a portion of the company's future profits. Finally, Ethereum-based applications remove all sorts of third-party payments for services.

In short, Ethereum is a public, open-source, blockchain-based platform that allows developers to build and launch decentralised applications.

Ethereum is a decentralised system that uses a peer-to-peer approach. Each interaction occurs between users and is solely supported by them, without the involvement of any supervisory authorities.

Ethereum is backed by a global "node" system that represents volunteers who download the entire Ethereum blockchain to their desktop and fully enforce all of the system's consensus rules, ensuring the honesty of the network and receiving rewards in return.

These consensus rules are dictated by "smart contracts" designed to automatically perform transactions and other specific actions within the network with parties you may not necessarily trust. The conditions that both parties must meet are pre-programmed into the contract. The execution of these conditions then triggers a transaction or any other specific action. Many people believe that smart contracts are the future and will eventually replace all other contractual agreements, because the implementation of smart contracts provides greater security than traditional contract law, reduces the transaction costs associated with the conclusion of contracts and builds trust between two parties.

The system also provides its users with the Ethereum Virtual Machine (EVM), which essentially serves as an execution environment for Ethereum-based smart contracts. It provides users with the security needed to run untrusted code while ensuring that programs don't interfere with each other. The EVM is completely isolated from the main Ethereum network, making it the perfect tool to test and improve smart contracts.

The platform also provides a cryptocurrency token called the "Ether".

Is Ethereum a cryptocurrency? What about Ether?

By definition, Ethereum is a computing platform that acts as a decentralised internet as well as a decentralised app store. The Ether cryptocurrency is the currency that makes it possible to pay for the computer resources necessary for the operation of an application or program.

Ether is a digital asset that does not require a third party to process payment. But Ether does not only work as a cryptocurrency, it also acts as a "fuel" for decentralised applications on the network, because when a developer wants to modify an Ethereum application, he or she must pay transaction fees so that the network can process the change.

Is Ethereum like Bitcoin?

Ethereum and Bitcoin may seem similar when it comes to cryptocurrency features, but the reality is that they are two completely different projects with completely different goals. While Bitcoin has established itself as a relatively stable and best-performing cryptocurrency to date, Ethereum is a versatile platform whose digital currency Ether is just one component of its smart contract applications.

Even comparing the cryptocurrency aspect, the two projects appear to be vastly different. For example, Bitcoin has a cap of 21 million bitcoins that can be created, while the potential supply of Ether can be virtually unlimited. Additionally, Bitcoin's average block mining time is 10 minutes, while Ethereum's doesn't exceed 12 seconds, which means faster confirmations.

Another major difference is that mining bitcoins nowadays requires considerable computing power and electricity and is only possible through the use of industrial-scale mining facilities. On the other hand, Ethereum's proof-of-work algorithm encourages decentralised mining by individuals.

Perhaps the most important difference between the two projects is that Ethereum's internal code is complete, which means that literally anything can be computed as long as there is enough computing power and time to do it. Bitcoin doesn't have this capability. While the complete touring code offers Ethereum users virtually limitless possibilities, its complexity also means potential security complications.

How does Ethereum work?

Ethereum technology is based on the Bitcoin protocol and blockchain design, but modified so that applications other than monetary systems can be supported. The only similarity between the two cryptocurrencies is that they store the transaction history of their respective networks, but the Ethereum blockchain has more advantages, because each node of the Ethereum network must also download the most recent state, or current information, of each smart contract within the network, each user's account balance as well as all of the smart contract's code and where it is stored.

Essentially, the Ethereum blockchain can be described as a transaction-based state machine that is able to read a series of inputs and transition to a new state based on those inputs. When transactions are executed, the machine transitions to another state. Each state of Ethereum is made up of millions of transactions that are grouped into "blocks" that are linked together. In order for the transaction to be posted to the ledger, it must be validated through a mining system.

Mining is a group of nodes that use their computing power to complete a "proof of work" challenge, which is essentially a mathematical puzzle. The more powerful the computer, the faster it can solve the puzzle. An answer to this puzzle is itself proof of work, and it guarantees the validity of a block.

Many miners around the world compete with each other in an attempt to create and validate blocks, because each time a miner proves a block, new Ether tokens are generated and awarded to the miner. Miners are the backbone of the Ethereum network, as they not only confirm and validate transactions and any other operations within the network, but they also generate new tokens of the network currency.

What can Ethereum be used for?

The main use of Ethereum is to create decentralised applications. These decentralised applications completely change the relationship between companies and their audiences. Nowadays, there are many services that charge commissions for simply providing an escrow service and a platform for users to trade in goods and services. The Ethereum blockchain also allows people to trace the origin of the products they buy, and smart contracts ensure safe and fast trade for both parties without any intermediaries.

Blockchain technology itself has the potential to revolutionise online services as well as industries with long-established contractual practices. For example, the insurance industry in the United States has over $8 billion in life insurance funds, which can be redistributed fairly and transparently through blockchain. With the implementation of smart contracts, customers can simply submit their insurance application online and receive instant automatic payment, assuming their application meets all the required criteria.

Essentially, the Ethereum blockchain is able to bring its fundamentals – trust, transparency, security and efficiency – to any service, business or industry.

Ethereum can also be used to create DAOs (Decentralised Autonomous Organisations), which operate completely transparently and independently of any intervention, without any single leader. DAOs are managed by programming code and a set of smart contracts written on the blockchain. It is designed to eliminate the need for one person or group of people to have complete, centralised control of an organisation.

DAOs are owned by people who have purchased tokens. However, the number of tokens purchased doesn't equal the number of shares and ownership. Rather, tokens are contributions that confer the right to vote.

Benefits of Ethereum

The Ethereum blockchain is completely immune to third-party intervention, decentralised applications and DAOs deployed within the network cannot be controlled by anyone.

A blockchain is built around a principle of consensus, so the nodes in the system must agree on every change made within it. This reduces the risk of fraud, corruption and makes the network tamperproof.

The entire platform is decentralised, meaning there is no possible single point of failure. Thus, all applications will always stay online and will never be disabled. Its decentralised nature and cryptographic security make the Ethereum network well protected against possible hacker attacks and fraudulent activities.

Drawbacks...

Smart contracts are supposed to ensure the network operates smoothly, but they can only be valid if the people writing the code are skilled. Human error is always possible, and any errors in the code can be exploited. If this happens, there is no direct way to prevent a hacker attack or exploitation of an error. The only way to do that would be to reach consensus and rewrite some underlying code. However, this goes completely against the very essence of blockchain, as it is meant to be an immutable and unchangeable ledger.

In 2016 a DAO was attacked, hackers managed to steal 3.6 million Ether tokens by exploiting a "recursive call bug" in the code. This attack undermined user confidence and the value of Ether dropped by 35%.

What applications were developed on Ethereum?

Ethereum has the potential to open up the world of decentralised applications even for people without any technical background. If this happens, it may become a revolutionary leap for blockchain technology that will bring it closer to mass adoption. Currently, the network is easily accessible through its native Mist browser, which offers a user-friendly interface as well as a digital wallet for storing and trading Ether. More importantly, users can write, manage and deploy smart contracts. The Ethereum network is also accessible via a MetaMask extension for Google Chrome and Firefox.

The Ethereum platform has the potential to profoundly disrupt hundreds of industries that currently rely on centralised control, such as insurance, finance, real estate and more. Currently, the platform is used to build decentralised applications for a wide range of uses and industries. Below is a list of some of the bigger ones:

• Gnosis - A decentralised forecast marketplace that allows users to vote on anything from weather to election results.
• EtherTweet - This application duplicates Twitter's features, providing users with a completely uncensored communication platform.
• Etheria - It looks a lot like Minecraft, but exists solely on the Ethereum blockchain.
• Weifund - An open platform for crowdfunding campaigns that implements smart contracts.
• Uport - Provides users with a self-sovereign ID that allows them to collect verification, login without a password, digitally sign transactions, and interact with Ethereum applications.
• Provenance - The project aims to create an open and accessible information framework that enables consumers to make informed decisions about their purchases. This is done by tracing the origin and history of products.
• Augur - An open predictions and forecast market that rewards correct predictions.
• Alice - A platform that aims to bring transparency to social finance and charity through blockchain technology.
• Bitnation - The world's first virtual nation, a Blockchain jurisdiction. It contains many of the same functions as a traditional nation, such as insurance, education, ID cards, diplomatic programs, including those for ambassadors and refugees, and many others.
• Ethlance - Independent platform where you can exchange labour for Ether instead of regular money.

A comprehensive list of decentralised applications, which at the time of writing contains 3,017 apps, is available on the "State of the DApps" website.

How can I obtain some Ether?

To get some Ether; you can either buy it through a cryptocurrency exchange or do some cryptocurrency mining.

There are many cryptocurrency exchanges where you can buy Ether, which will be stored in a wallet, and can be provided by the exchange itself, by the native Ethereum browser Mist or by other specialised services.

You can also get Ether via a peer-to-peer exchange, paying for it with any agreed-upon currency, including Bitcoin and other cryptocurrencies. This can be done both online and in person. Peer-to-peer trading is quite popular among Bitcoin users. However, due to the virtually unlimited supply of Ether tokens and the Ethereum platform that does not put complete user anonymity at the forefront of the system, Ether is usually obtained through exchanges.

Mining is another way to get Ether. Miners contribute their computing power to solve a complex mathematical problem in order to complete and confirm a block of actions within the network. Miners who successfully complete this task receive a reward for each block they mine.

Comparison of the main cryptocurrency platforms

Exchange	Headquarters	Licence	Cryptocurrencies	Review	Open an account
	Hong-Kong / Malta	AMF, FCA, MSB CBB	365	Binance
	Ireland	CBFSAI	35	Skrill
List and comparison of the main cryptocurrency exchange platforms