What is Ethereum?
To start Fetch’s Ethereum 101 Series, here’s a primer to get you started and explain the basics of Ethereum.
Ethereum is an open-source platform for decentralized applications.
That’s quite a mouthful. Let’s break down the terminology to simplify what Ethereum is and is not.
Open Source
This one is pretty simple. The source code of Ethereum is freely available for anybody to inspect or modify. Official changes allowed to be contributed back are managed by an authorized group of software developers as well as the larger Ethereum Foundation.
Want to take a look at the code yourself? You can download the code today.
If you’re a developer interested in digging into tools and knowledge for the Ethereum codebase, take a look at the Ethereum Foundation’s developer intro.
Decentralized
Ethereum is a decentralized system, meaning it is not controlled by any single entity. Nobody “owns” Ethereum, everybody does. For example, a company, a centralized system, is a single entity that is owned by shareholders. The company could be shut down by a government regulator or the board of directors.
Ethereum has no board of directors or single point of failure that can be exploited in the same way.
How It Works
Ethereum runs on thousands of computers simultaneously , called nodes. Some are provided by volunteers as a contribution back to the ecosystem, while many are operated by companies in the business of providing computing power to blockchain based systems for profit potential.
In either case, all nodes are created equal and allow the applications and data on Ethereum to be processed simultaneously. Shutting down one or many of the nodes does not shutdown Ethereum. It simply continues to operate on the remaining nodes or new ones contributed to the network.
Applications
Each node supports the Ethereum Virtual Machine (EVM). The EVM allows applications to be run, similar to how your iPhone supports apps to be installed and run. EVM applications are called Smart Contracts.
While Smart Contracts could power any type of application (games, betting, etc…), their primary purpose has been to create financial applications. Everything from lending, borrowing and trading has been created thus far. The possibilities for more applications are endless.
Some interesting examples today include:
Ethereum vs. Bitcoin
As the two largest cryptocurrencies, Ethereum and Bitcoin are often compared. However, they have very different goals. Bitcoin is a money transfer and store of value cryptocurrency built on a distributed public ledger, a blockchain. You can think of it like digital gold.
Ethereum runs on a blockchain as well and expands the capabilities to enable applications to live and run on the blockchain. This creates a digital money that can be held on the blockchain and programmed or controlled via applications.
Next
Now that you’ve got the basics of Ethereum down, check out part 2 of our guides, What is Ether (ETH)?
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