Ethereum is not Bitcoin: It’s more like a ‘brother from another mother’.

If you have missed my first post on Blockchain here’s the link (Blockchain in 11 mins). It has everything you need to get started with Blockchain.

Both, Ethereum and Bitcoins are permissionless, public blockchain networks that provides a distributed data storage to manage transactions. However, Ethereum is a bit different than bitcoins as it not only provides a distributed data storage but also provides computing resources so the nodes are able to execute code.

Ethereum is an open software platform based on blockchain technology that allows developers to build and deploy decentralized applications (DAPPS).

People often confuse between the terms Blockchain, Bitcoins and Ethereum. Remember that Blockchain is the technology, and Bitcoin/Ethereum are only implementations of this technology. In the early 90s, people often confused email to internet. Email is only a single implementation that uses the internet.

Vitalik Buterin, in 2013 spoke in favor of scripting on the bitcoin, however none of his peers from the Bitcoin team liked his idea about it. So he went on to write a white paper on it. Here’s the link to the white paper. Later in 2014, he met his CTO Gavin Wood and founded Ethereum. The system went live on 30 July 2015, with 11.9 million coins “premined” for the crowdsale.

Despite the ability of scripting in Ethereum, there posses several other features that can be used to compare Ethereum to Bitcoins.

I wish had a table option so I need not have to upload images :(

Evolution of Ethereum

The evolution of Ethereum is a rather short one. The current version of Ethereum at the time of writing this post (July 2017) is Homestead, and there are rumours that a newer release ‘Metropolis’ will be out in August 2017.

Evolution of Ethereum

‘Olympic’ was a testnet, meaning it was not used for real commerce, but for developers to test if there are any security flaws. ’Frontier’, was the Beta version.

DAPPS or Decentralized Applications

Unlike traditional web applications, DAPPS doesn’t send/receive request to/from a central server. Consider ‘UBER’ for example, when we request for a cab ride the request goes into Ubers central server to find us a driver who’s in the closest proximity. The following illustration will guide you through the process of how ‘UBER’ functions.

In a DAPP, the front end application directly gets connected to the Ethereum backend. The business logic is implemented as a ‘Smart contract’ and executed on the Ethereum block. The data resides in the contract instance itself. In the case of UBER when the user request for a cab via the DAPP, the smart contract help to connect the user with the closest cab. (not illustrated in the diagram)



Ether or ETH, is the value token of the Ethereum blockchain. Ether, can be traded on crypto currency exchanges and also be used as a form of payment made by the clients of the platform to the machine executing the requests.

The price of this tokens are unpredictable as the prices have plunged several times at even 5000%. However, It is been noted that The DAO was hacked on June 2015 and the price of the Ether has dropped from $21.50 to $8.

Ethereum has a metric system of denominations used as units ether. The smallest denomination aka base unit of an ether is called a ‘Wei’. It’s a denomination, like cents to Dollars or pennies to Pounds. Below is a list of the named denominations and their value in Wei.

Ethereum Virtual Machine

Also known as EVM, is the runtime environment for smart contracts in Ethereum. EVM runs the contracts byte code which is generated by Solidity or any other language that can be used to write a smart contract.

Smart Contract

Smart contracts are code written in Solidity, Serpent or Lisp like language that can run on EVM. Smart contracts are the business logic that acts as the middleman for the transaction.

To understand smart contracts lets see how we can use blockchain technology to replace companies like Ebay auctions where one will have to bid to buy the item.

Ebay acts as the middleman to facilitate the transaction, and they charge a huge fee from the seller as a result of the facilitation. The proposed app using Smart contracts may make you think twice about using Ebay auctions if such an app is available.

This is how a bidding takes place on Ebay.

Me and Jake, bid on a ‘Jigsaw Puzzle’ that was displayed on Ebay auction. The time duration set for the bid was 1 hour therefore the two of us added various amounts as bids but finally I won it. I was informed by Ebay as I won the auction so I paid the agreed amount to Ebay who’s the facilitator. Ebay, takes it commision and deposits the remaining to the sellers account, where the seller ships the item to me.

By using blockchain technology we can remove the middleman which in this case is Ebay by the use of a smart contract.

When me and Jake place a new bid the smart contract updates itself with the highest bid. Once the bid duration has been reached the smart contract will inform the seller and Myself about the winner where I will have to pay the agreed amount. The Smart contract will act as an Escrow service where it’ll hold said funds until the seller ships the item to the me thus, release the funds to the seller upon confirmation of goods received.

The above example is used only to illustrate how smart contracts can be used to replace middleman services like Ebay thus, we will look how to design a fully functional escrow service at a later section.

The middleman fee charged by Ebay is not required in a decentralised application, thus, the smart contract handles it entirely. However, to execute each transaction the bidders will have to pay Ethers which is often called as ‘Gas’.


Gas is a unit. It’s like Kilograms or Liters which we use to measure stuff. I have no idea why the Ethereum founders chose Gas to be the unit, as if they couldn’t find any other name to call it. Gas is the unit in which the amount of EVM resource required is measured. Gas amount depends on 2 attributes: Instructions and storage. The more instructions and storage required the more he/she should pay.

Pay who ? Doesn’t Ethereum, build on Blockchain technology that boast it has no centralized authority. Then who takes all these cash ?

The miners take it. You need to pay the miners because they need to maintain their hardware and also pay for electricity.

The amount he/she should pay in Ethers depends on the instructions executed, and the per unit gas price specified in the transaction. The Miners can decide if this price is acceptable or else the user will have to increase the gas price to execute the transaction.

Ethereum Network

There are few Ethereum networks available. Live, Test-net and Private. We use these networks for different purposes discussed briefly below:

Live — This is the real deal. This is where you really execute the transactions, pay for gas etc. If you’re going to invest in Ethers then you’ll be using this. Each Ethereum network is given a network ID, and the Live network has a network ID on 1.

Test-Net — As the name suggest this is where we use to try out Ethereum. Therefore, throughout this lecture series we’ll be using Test-Net to explore various examples. The network ID given to the Test-Net that we’ll be using is 3. The game given to the Test-Net that has the network ID 3 is called ‘ Ropsten’.

So, you might wonder, what happened to the network ID 2. It was retired. It’s called ‘Moden’.

Private — There might be a particular scenario where we might not require to make our data available in a public network due to data privacy. In that case we can consider using a private Ethereum network. The network ID is assigned by the user itself.

A Consortium network is also a form of Private network, where many individuals can come together and form a private chain. For example, all the banks can come together to form a consortium private chain. So, unlike the live, or the test-net network, this Consortium networks are permissioned. Meaning you need to grant access to the blockchain.

Earn $10 of FREE Ether


All you have to do is to register with an exchange. You can register using the following referral link, so both you and me will get $10 worth of Ether for free.

Click on the link to claim $10 worth of FREE Ether:

If incase you like to donate some Ether’s to me please do so :D here’s my address :


What’s next ?

Let’s start developing our first DAPP and try to execute smart contracts.

Do let me know if they’re any questions related to Ethereum or Blockchain. Email me at or contact me via the comments section below.

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