What is Ethereum? (Blockchain series — Part I)
The technology behind Bethereum
Have you ever heard an individual talking about the price of Bitcoin, Ether, Ripple, Bether, or some other magical digital asset that is categorised as a cryptocurrency? Odds are you have and you might not have fully grasped the entire concept of an intangible currency that operates on a system called blockchain. Don’t worry, there’s a high probability that the individual you heard talking about the cryptocurrency didn’t understand the entire concept either. The purpose of this article is to simplify the entire blockchain eco-system to better inform future users of the Bethereum technology.
What is blockchain? Well the formal definition of blockchain is:
A digital ledger in which transactions made in crypto-currency are recorded chronologically and publicly.
Basically in its simplest form, blockchain is a method to send digital assets from one peer to another without the overshadowing of a central authority. For example, you want to transfer U.S. dollars from your bank account to your friend’s bank account. You need to first go through your bank (the central authority) and authorise the transaction to your friend’s bank. Both banks then need to communicate among each other to verify the transaction. While this is a relatively safe and secure method, the process is time consuming and encompassed with fees. In blockchain, there is no central authority. If you would like to pay your friend using a digital asset you would simply type in your friend’s wallet address, initiate the transaction, and pay the fees for using the chain.
Think of the process in these terms:
Your wallet is your house, the cryptocurrency is your car, the blockchain technology is a highway, your friend’s wallet is your friend’s house, and the fees are a toll. To reach your friend’s house (the end destination), you must drive your car from your house (point of origin), proceed on a highway, and pay a toll along the way to use the road (for maintenance and upkeep). In this process there is not one single authority monitoring the process and ensuring that your car reaches its destination. Instead, there are multiple, independent workers (miners) who guarantee the highway remains open and clear.
To verify the transactions on the blockchain, all settlements and their accompanying wallet addresses are publicly displayed. Using the example from before, anyone and everyone can view your house address (your wallet address), your friend’s house address (your friend’s wallet address), and your car (the cryptocurrency in the transaction). No one, however, can see inside you or your friend’s houses, meaning no one knows your actual identity. In the blockchain transaction schema, both you and your friend are just a random mix of letters and numbers.
Note: This example does detail the nodal consensus system (each blockchain has a different consensus method) used to actually verify transactions and create new blocks, as this article is intended for novice users.
Ethereum is a blockchain that has its own cryptocurrency, Ether. The transaction process works the same as above. Ethereum is special, however. Applications can be directly built on top of the Ethereum blockchain to allow for smooth and easy transactions. Adding to example previously mentioned, instead of the blockchain “highway” consisting of plain road, now there are businesses on the pavement. In the Ethereum system, you once again leave your house with your car to travel on the highway (still paying a fee for the toll), but instead of going to your friend’s house, you travel to the grocery store on the highway to buy food. In this example, the cryptocurrency is exchanged for goods.
Ethereum utilizes a method called smart contracts. When a contract is engaged, cryptocurrency assets are frozen until a certain outcome is reached. In the example above, the grocery store wouldn’t receive payment until the buyer received their food (as in a normal, real-life situation).
Bethereum and Bether
So what exactly is Bethereum and why does it use a different currency called Bether?
Bethereum is a decentralized, sports-betting platform built on top of the Ethereum blockchain. The platform utilizes smart contracts on each occasion a bet is placed and allocates winnings depending on the outcome via oracles. Within the Bethereum application, a better is not paid until the outcome is finalized. Bethereum also has no partaking in holding or allocating funds. Instead, smart contracts hold the bet amount between participants when a bet is placed and allocates the funds to winners based on the outcome.
For the platform to utilize smart contracts, a cryptocurrency must be used (smart contracts cannot be implemented without currency transactions). Bethereum elected to create its own currency, Bether (an ERC-223 token). Ethereum created a unique token standard called ERC-20 (now ERC-223). This concept allows decentralized applications to create their own currencies on the Ethereum blockchain to utilize smart contracts. All ERC-20 and ERC-223 tokens are directly compatible with the Ethereum blockchain and transferable into Ether on an exchange or in the platform.
Note: (1 Ether=17,500 Bether)