ETHEREUM IS IT A BLOCKCHAIN? IS IT A TOKEN?
Ethereum’s cryptocoin is called ether (ETH) and its more than a cryptocurrency, it’s a decentralized blockchain platform, as in opposed to a centralized bank or a third party as the traditional system, that creates a safe peer-to-peer smart contracts.
The benefit of using these AKA smart contracts is that the Blockchain apps provide a secure decentralized way to verify and to enforce them.
Smart Contracts is a computer protocol intended to facilitate, verify and enforce the negotiation of a contract. They allow credible transactions to take place that are trackable and irreversible.
Blockchain is a continually growing shared list of records, visible to all users, called blocks, which are linked and secured by using cryptography, keeping a record of every transaction that has ever been processed. Eliminating the need for third parties and the challenging task of keeping these virtual coins uncorrupted or cloned.
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Allow me to explain in a simple day to day example:
If I gave you a coin, I put it on your hand, I transferred it to you, it is now in your possession, you have it, you touched it, we can both see it because it exists physically, so we do not need someone else to ensure us that the coin is now in your hands, correct? So giving you the coin was simple and it did not need a third party to make the transfer. We know it exists and that it is now yours.
But how would you do that with a virtual coin? Because with a virtual coin you could easily make several copies of it and send it to anyone you desire. So how could we ensure only one coin of it’s kind gets to be sent out without a third party involved (like paypal)?
The solution is, instead of having one centralized bank of data living in one computer, now it lives in several. A decentralized unchangeable blockchain with every transaction that has ever been done. Each transaction receives a code, like a finger print called ‘hash’.
Get it?
Ethereum is a platform that allows you to create smart contracts and digital tokens/coins by using pre-coded rules. Even though Ethereum is constantly compared to Bitcoin, it has a vast difference in its intentions. Bitcoin (BTC) is in the market exclusively to become a strong, relatively stable currency, while Ethereum is out looking for more, and ether (ETH) is just one aspect of it.
NOTE: Learning the vocabulary may be one of the first things necessary before understanding how this cryptocurrancy world actually works, and where the Ethereum platform fits.
(Keywords to study: Decentralized computing, BTC, bit, Satoshi, Bitcoin, Bitcoin address, wallet, block, confirmation, blockchain, double spend, mining, hash rate, private key.)
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First Published on Winco.io
