A Simple Guide To Ethereum [Smart Contract Network 101]

Ethereum is the world’s second-largest and most popular cryptocurrency. Unlike many other “Altcoins,” you need to understand Ethereum if you want to understand the future of crypto innovation.

In simplest terms, Ethereum is meant to be a worldwide network for using a new innovative technology called “smart contracts.”

The Ethereum Network is designed to be a faster, more secure, and globally accessible online ledger of transactions.

How does Ethereum work?

“Ethereum” is technically a “blockchain technology,” not a cryptocurrency.

Common Misconception: When people say “Ethereum,” they are referring to the Ethereum Network.

“Ether” or “ETH” is a cryptocurrency you buy on exchanges.

Terminology Defined Simply

The word “ether” in the Ethereum Network is synonymous (similar) to the word “dollar” in the physical world.

Chris Davis, an author at NerdWallet, explains that “When you’re buying Ethereum, technically you’re converting your U.S. dollars into “ether,” or ETH, which is the currency of the Ethereum blockchain.”.

Basically, you would buy things on the internet using ether rather than dollars.

“Ether” can be used for transactions just like all cryptocurrencies; however, it removes the need for a third-party mediator.

Ethereum can run “decentralized systems” because it uses a new innovative technology called “Smart Contracts.”

Smart contracts provide such an excellent upgrade to financial payments that intermediaries are no longer cost-efficient or valuable.

Smart Contracts Defined

Smart Contracts are a new technological innovation that could potentially integrate into most industries as the new emerging standard of privacy, security, and contract integrity.

In his article Smart Contracts: The Blockchain Technology That Will Replace Lawyers, Ameer Rosic, writer for BlockGeeks, explained that smart contracts are “a computer protocol intended to digitally facilitate, verify, or enforce the negotiation and performance of a contract.”.

In shorter terms, a smart contract is an unbreakable digital agreement between two consenting parties.

“Smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.” (BlockGeeks)

It has been theorized that the invention of smart contracts can massively disrupt a variety of traditional industries such as banks, lawyers, and real estate agents.

It would be best if you continued paying attention to smart contracts.

Now back to Ethereum.

Why was Ethereum created?

Ethereum was meant to be “a platform for the deployment and execution of smart contracts,” according to the official Whitepaper.

Simplification

The Ethereum Network has various complex uses and applications. Still, the main selling point of Ethereum is its ability to simplify all of our existing systems drastically.

According to Coindesk, “You can use Ethereum for sending and receiving value globally and without a third party watching or stepping in unexpectedly.”

Simply put, participating in global free market trade is now much easier and safer than we all originally thought.

Private Data Security

We all know that companies collect and analyze our private data.

The problem was that nobody had yet made it easy for ordinary people to protect themselves from this fact.

For example: if you use a service like Google, Facebook, or even PayPal, then it is a guarantee that those companies have a compiled archive of your personal data that they use to get you to spend more money on specific ads and services.

Some of these companies use this data to genuinely make their services and platforms better. This is a small benefit in the more enormous scope of what data collection means.

Our data, financial information, and so forth are all primarily stored on other people’s computers — in clouds and servers owned by major companies.

Companies use this data to make a profit. It is often sold to other entities that wish to exert a more forceful control over consumer attention and public opinion.

How would you defend yourself against this?

Ethereum’s Decentralized Structure Fixes This

People can use Ethereum to decentralize their lifestyles using what’s being called “decentralized applications” or “Dapps.”

In simple terms, decentralized applications are any product or service that uses smart contracts to ensure the privacy and security of users.

For the sake of just understanding “Dapps,” “centralized applications” can potentially control, extort, or censor users. In contrast, “decentralized applications” make that impossible.

This centralized structure can be problematic, according to decentralization advocates. It means less direct control for users.

It also opens up opportunities for censorship. The intermediary can step in and prevent a user from any action, whether buying a particular stock or posting a specific message on social media.

Suppose you are interested in protecting your private data and minimizing your risk of being censored. In that case, Dapps may be of great value to you.

Examples of Dapps:

Some examples of decentralized applications include but are not limited to…

• Direct peer lending that earns interest.
• Insurance without the insurance company.
• Payments without the payment processing company.
• Music streaming in which the money goes directly to the artist, not a streaming platform or record label.
• Art auctions without an auctioneer.
• Marketplaces for nonfungible tokens, or NFTs.
• Online gaming marketplaces.

Who created Ethereum?

Ethereum comes as a result of conflicting ideologies. The basic concept stems from heated disagreements within subcultures of the crypto community.

Felipe, an author for Medium, writes in his paper “Visions of Ether” that “The original motivation for Ethereum stemmed from Bitcoin’s scripting limitations. The tale of a young idealist leaving the “toxic” Bitcoin underworld was appealing to mainstream journalists having to report on crypto after the 10x price increase in BTC by the end of 2013".

This “young idealist” is the founder and creator of Ethereum, Vitalik Buterin.

Vitalik proposed the Ethereum project in 2013; it now serves as the second most valuable “blockchain” globally.

Buterin is well known in the crypto community. He is often a topic of frequent debate as he actively diverts from many of the traditional “Bitcoin ideologies.”

A great way to really understand Buterin is to watch one of his talks.

He wears a “goat shirt with rainbows on it.”

Still not understanding crypto? That’s ok! Check out this digital currency cheat sheet.

Why do people not like Ethereum?

As with any new phenomenon, there are bound to be a few severe critics. Ethereum is no exception.

The most common counterarguments aimed at Ethereum generally come from disbelief in its long-term capabilities.

Some respectable critics argue that the Ethereum Network currently charges outrageously high “gas” fees to mint smart contracts and other blockchain functions.

Then there is that other subset of critics that hate Ethereum for more competitive reasons.

Bitcoin loyalists, commonly referred to as “Bitcoin Maxi’s,” see Ethereum as a significant competitor to Bitcoin.

As with any online community, you will find die-hards for each of the polar divisions on the subject. However, most crypto companies strive alongside each other rather than actively tearing each other down.

Generally speaking, it’s rare to find these kinds of crypto critics that exclusively want to tear emerging ideologies down.

“Crypto-communities seek for newish narratives or adapt current ones as an exercise of collective strengthening.” (Visions of Ether). This means that most participants in the crypto space understand that any participation is good participation.

It doesn’t matter if it’s good for one coin over another; mass awareness is vital.

A popular thread on Reddit called “Why a lot of hardcore Bitcoiners really hate ETH” explains more about the jealousy of Bitcoin maxis.

One Reddit user says, “They’re just mad their coin became a savings account rather than the cash of the future.” Referring to Bitcoin’s primary function as a “store of value” or a “reserve currency.”

Another Reddit user argues that the hate is just based on greed. He says, “They see other cryptos as taking something away from bitcoin. Most of them don’t care about decentralized currency; they only care about lining their own pockets.”

Many Bitcoin “Maxi’s” see the value of ETH as a threat to Bitcoins’ long-term viability.

In summary:

Ethereum is a worldwide network for using what’s called “smart contracts.”

Ether is the currency of the Ethereum Network, which can be used to purchase goods and services online safely and privately.