What is Ethereum? | ETH Basics Video | Advantage Blockchain
Welcome to Advantage Blockchain, the easy, affordable way to learn about blockchain and cryptocurrencies online. This lesson is about Ethereum Basics to help you answer the question: What is Ethereum?
Ethereum Basics
Ethereum is a global, blockchain based, open-source platform for decentralized applications. Ethereum is a decentralized (no controlling authority), permissionless (anyone can use) payment network with additional capabilities. Ethereum uses the Ethereum Virtual Machine, a system designed to operate as a runtime environment for Ethereum based smart contracts. On Ethereum, you can write code that controls digital value, runs exactly as programmed, and is accessible anywhere in the world. In the simplest terms, Ethereum is programmable money.
Ethereum was founded by developer Vitalik Buterin. Buterin had a vision for the first currency-integrated global supercomputer, and needed funding to see the protocol to fruition. Because of this, there was a massive crowdsale conducted which accepted Bitcoin as payment for Ether (Ethereum native currency) when the network went live. Initially, the going rate was 1 bitcoin for 2000 Ether. At launch 72 million Ether were created and given to early investors. Since Ether was a required to participate in the network, Ether was deemed not a security from a regulation standpoint. It was deemed to have utility beyond the requirements representative of a security. The crowdsale saw instant success and set up the ground work for the future ICO model.
Technical Value
Ethereum is essentially the missing value layer for the internet. With Ether anyone around the world can transact value without a trusted 3rd party. Also, Etheruem’s network has the Ethereum Virtual Machine, which is a decentralized ecosystem for building applications on top of Ethereum.
Ethereum produces a new block every 14–15 seconds, which rewards the winning miner 2 Ether per block mined. Ethereum uses an Account model to verify transactions and balances on-chain whereas Bitcoin uses an unspent transaction output model. Several standards have been created by various groups to help developers and businesses create value on Ethereum. A couple of these are ERC-20 tokens and ERC-721 NFT’s (or non-fungible tokens). ERC-20 is the standard behind an ICO token, where NFT’s assign a digital identity to something. An example of an NFT would be crypto kitties or a piece of digital art on the Ethereum blockchain. We’ll be diving into ERC-20 and ERC-721’s in a later video/class.
Value Add
Ethereum today exists for two main purposes; crowdfunding through ICO’s and Open Financial tools for corporations, investment firms, and individuals. Both have given retail investors the opportunity to invest promising new blockchain projects using Ethereum technology. The potential of smart-contracts is huge for businesses in many industries worldwide. ETH provides a medium for automated payments worldwide and across borders. Automated, instantly verifiable payments become crucial as more goods and services are exchange through digital transactions.
Scalability Issues
For Ethereum to be successful it needs to be not only decentralized, transparent, and secure, but must also be scalable. Currently, the embedded proof-of-work technology can not process transactions quickly enough to accommodate a global market place. Ethereum is not scalable, and that is what the upcoming ETH 2.0 plans to accomplish. ETH 2.0 is a new evolution in the development of the Ethereum protocol that aims to solve scalability issues by moving to proof-of-stake. Proof-of-stake is a new and highly efficient blockchain protocol that improves scalability.
Ethereum Outlook
Several interest groups have invested massive amounts of money and time into Ethereum’s success. The Enterprise Ethereum Alliance was formed in early 2017, which consists of Fortune 500 companies, blockchain startups, and research groups that have committed to supporting Ethereum. The Ethereum Foundation was formed as a non-profit in 2015 to see through the crowdsale and early development stages of Ethereum. Consensys is another Ethereum-based company created by Ethereum Co-Founder Joseph Lubin. Their goal is to implement work standards and protocols for developers and companies. These organizations create a rich Ethereum ecosystem that is open and decentralized, available to anyone who wants to get involved. Ethereum has strong financial backing and for the technology which is sure to impact many industries and act as a payment protocol for the decentralized internet.
