A Beginner’s Guide to Ethereum

When Bitcoin was created in 2009 it sparked a social and technological movement and has since sent ripples across the financial industry.

A promising technology, one often times pushed by the wayside under the guise of “blockchain” or “distributed ledger” in the press. It was the first technology that allowed us to securely send money across the internet, without fear of fraud or censorship. However, several pioneers saw some potential in the underlying technology that powered the secure payment system: the blockchain.

What initially enabled many individuals to send money, also held the potential to decentralize the Internet as we know it.

But there was one caveat (or several for that matter), Bitcoin wasn’t designed to send anything more than a few kilobytes of data per transaction, nor was it capable of performing calculations that didn’t fit into his limited (by design) scripting language. Satoshi Nakamoto, the creator of Bitcoin, believed that limiting the functionality of the system would significantly improve security.

But Vitalik Buterin, the creator of “Ethereum”, saw things a little bit differently. Vitalik imagined Ethereum as a “world computer”; one that fits a virtual machine (the EVM), a Turing-complete language(Solidity, and soon Viper), a token (ETH), and fuel (gas) to power every transaction in its network. This combination allows the creation of complex programmatic computational instructions — commonly known as smart contracts and decentralized applications or “DApps”.

What previously took entire separate tokens and platforms, Ethereum could implement with a few lines of code. Some examples are currently under development or available right to the public: prediction markets, decentralized file storage and computation, insurance contracts, decentralized identity — and much much more.

Ethereum has its own token called “Ether” (ETH); it can be used to pay other people or even machines. In essence, you can send ETH to a smart contract which will then execute itself (ETH is converted to “Gas” when seeking to execute computations in the “EVM”) and perform its a complex set of instructions. With Ethereum, a person can pre-set withdrawal limits; you can even create a smart contract that will send your ether to a loved one when certain conditions are met, such as an outside oracle verifying your death.

The DApps Ecosystem

The main feature of Ethereum is the support for decentralized applications; among them are several of the most exciting projects currently in our fledgling, “blockchain-based” industry — let’s dig in:


Golem is an Ethereum-based decentralized computation network. With this platform, a user can buy or sell computational power, which means that you can either complete a computationally-heavy task on someone else’s computer or sell your idle computing power to someone who needs it. Golem can distribute the task of rendering CGI, doing in minutes what would take days, and all computations take place in virtual machines and are fully isolated from the host’s system.

Golem is a powerful idea; one if executed appropriately, could lead to huge jumps in the accessibility of developers all over the world to access the same powerful resources to create the next big thing.


Gnosis and Augur are two of the most important DApp projects in the Ethereum ecosystem, both powering decentralized prediction markets. Prediction markets allow users to purchase and sell shares in the outcome of an event (Yes or No, Win/Lose, etc) and be rewarded if you guessed (predict) correctly.

The data can be used by individuals or organizations to make more accurate decisions thanks to the” wisdom of the crowd” –a large group’s aggregated answers to questions involving quantity estimation, general world knowledge, and spatial reasoning has generally been found to be as good as, and often better than, the answer given by any of the individuals within the group.

Augur was launched in 2015, collecting more than $5 million in funding after the Initial Coin Offering (ICO) of its own token, Reputation (REP), to this date, Augur continues its developing phase, with an open beta for users to test. On the other hand, Gnosis is still preparing to launch its own ICO to distribute the tokens that will be used to power the decentralized platform.


One of the most pressing issues on the internet today is the centralization of user’s data. When you accept the terms and conditions of that app you just downloaded you aren’t just getting free stuff, you are becoming the product that company capitalizes from in the future when it comes time to monetize.

Another problem is that in today’s internet, our identity and reputation is scattered across a myriad of services. If something bad were to happen to eBay’s datacenter, your hard-earned reputation as a merchant would be destroyed forever. Sellers would then have to migrate to another platform and start all over again. A hassle for an individuals whose sole source of income is their reputation as a successful merchant.

Solutions like uPort could help to securely store your encrypted information on Ethereum’s blockchain, allowing you to share it whenever and with whoever you want to.


Status is a very interesting project as well. Status seeks to be a sort-of WeChat/WhatsApp like service for Ethereum. A platform, and an application. One that allows users to access a variety of difference DApps in the Ethereum ecosystem, and browse/interact with them all directly through the client.

Applications like Status are huge for Ethereum, as it blends a traditional messaging client, and a platform to quickly create and maintain a wallet/profile that you can then use to easily access the Ethereum network.

Status aims to make the barrier to entry to Ethereum low; and allows for somewhat of an Ethereum DApp store on your mobile device.


Built on the Ethereum Blockchain, WeTrust is is attempting to be unlike traditional other traditional lending services. Their system utilizes Smart Contracts executed on the public Ethereum chain that allow for the creation of “ROSCAs”(Rotating Savings and Credit Association.)

ROSCAs built on WeTrust enable low-cost savings like accounts for participants (friend & family) to trustlessly save money; and have a pool of funds to full from in time of emergency, or when needing to make a large purchase (think car down payment).

WeTrust lower costs and grants users greater privacy and control over your personal financial data. Their system introduces the ability to create networks of wealth easily, anywhere. Users can share funds based on self-reliance and take back power; rather than grant more to corporate, institutional or governmental agencies.

Just a Taste

That’s just a small introduction to some of the DApps thats are being developed on Ethereum. That doesn’t include the numerous tools and developer resources that are also being created to expand Ethereums reach to people all over the world.

Ethereum itself, the core protocol, is constantly undergoing improvements through a series of pre-planned hard forks (upgrades); and sometimes some are unplanned (emergency upgrades). But, overtime, the ecosystem of DApps built on this public system will eventually interoperate to form the basis of the next generation of the internet.

Total amount in $ raised by various ETH DApplications. Image courtesy of Coinbase Blog


This post is just a brief introduction to the potential of this new system. The Ethereum ecosystem, and the blockchain industry as a whole, matures/changes at a rapid pace.

When researching these topics, if you find it difficult to keep up with the pace of new information, you’re not alone. Take your time and be patient, learn as much as you can — it’s a journey.

If you think all this Ethereum stuff sounds great, below are some links to help you get a deeper perspective into the space. If you enjoyed this post, share it with a friend!

Join the BlockChannel Slack, too: http://blockchannel.signup.team; discuss trading, development, and make some like-minded friends.

Essential Medium posts on Ethereum