Understanding Ethereum Blockchain
By Abdulaziz Sirojiddinov on The Capital
The thing that I often ask startups on top of Ethereum is, ‘Can you please tell me why using the Ethereum blockchain is better than using Excel?’ And if they can come up with a good answer, that’s when you know you’ve got something really interesting.
Vitalik Buterin
Since Vitalik Buterin developed Ethereum, we hear the word “Ethereum” and typically associate it with a cryptocurrency — like Bitcoin from every other crypto-related community :). While that definition isn’t entirely incorrect — it’s important to understand that Ethereum is much more than just a simple cryptocurrency. If we try to understand: The Wikipedia page says:
Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract(scripting) functionality. It supports a modified version of Nakamoto consensus via transaction-based state transitions.
Sounds complicated? Then let us understand simply, briefly what Ethereum really is, and what can we do with it.
Ethereum is a decentralized programmable blockchain for building decentralized applications(dapp). Like other blockchains, Ethereum has a native cryptocurrency called Ether(ETH). Ether is digital money. Ethereum uses proof-of-work consensus algorithms to run its nodes. Like Bitcoin, Ethereum is a distributed public blockchain network. However, Ethereum can do much more, than other blockchains. As I mentioned, Ethereum is programmable, which means Ethereum allows developers to program their own “autonomous agents.” While it sounds nice, it is well beyond nice, it might be the foundation for a new era of the internet.
These autonomous agents mainly called smart contracts, they can be implemented into the Ethereum blockchain network and might be called by any user in the network while being forever immutable and fully transparent as transactions in a blockchain. No one ever can delete these programs, applications from the blockchain network and no one can even change its logic once it is in the network. The terms and outcomes of a smart contract are fully transparent to anyone, so it’s a fair game.
Additionally, Ethereum provides a level playing field for DApp creators. Its web of computers offers the same functionality to all users who want to use it to offer services.
Let us dive into a smart contract, and understand why it is an important ingredient for building a decentralized application on top of Ethereum.
What is Smart Contract?
Smart contracts are the key element of Ethereum. Basically, smart contracts are just like contracts in the real world. The only difference is that they are completely digital. In fact, it is a piece of software that contains rules and regulations for negotiating the terms of a contract. Smart contracts can be stored on a blockchain, interact with external data feeds and then self-execute payments, shipments of products or other actions based on conditional logic (programmed as traditional “if-then” statements — if A occurs, then B happens), agreed verifiable proof of performance, or other trigger events. The best way to understand smart contracts is just to think of it as program functions: there are inputs, logic to process the inputs, and output. The execution of smart contracts often results in updated states.
The contracts are built with Solidity — a language for writing smart contracts, similar to Javascript, as well as other frameworks and tools. Smart Contract owners can create their own arbitrary rules for transaction formats, functions, and ownership.
How Do Smart Contracts Work on Ethereum?
The Ethereum Virtual Machine (EVM) is a place where smart contracts run in Ethereum blockchain. Ethereum provides network members with access to the EVM — where developers can build smart contracts, these contract codes can be of many forms, such as the transaction of money when certain conditions are met or the exchange of goods between parties and embed them into the application.
Once the code is written, it is uploaded on the EVM- Ethereum Virtual Machine, which you can say is a universal runtime compiler or browser to execute the smart contract’s code. Because it’s decentralized, the execution doesn’t really take place on one device.
Conclusion
The Ethereum community is the largest and most active blockchain community in the world. It includes core protocol developers, crypto-economic researchers, artists, cypherpunks, mining organizations, ETH holders, gamers, app developers, grandmothers, anarchists, fortune 500 companies.
The Ethereum platform is helping to shift the way we use the Internet. Decentralized applications are pushing a fundamental change from an Internet of information where we can instantly view, exchange, and communicate information to the Internet of value where people can exchange immediate value without any intermediaries.
