What Is Ethereum?
Ethereum is a decentralized platform which operates smart contracts which are run on a custom built blockchain, ie. Ethereum’s blockchain – it also allows for the building of decentralized applications. A blockchain is a decentralized (no central governance) shared public ledger (a distributed computing network), which contains continually updated and public records of all transactions on it. This is spread over a network of computers, and each “node” executes and records the same transactions – these are all grouped into “blocks”. A smart contract is operated on a blockchain. And although some may question smart contracts in different regards, they are defined by Ethereum (the inventors of these applications) as:
applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
Ethereum has become an innovative foundation for new companies and applications to be built upon. It also has it’s own cryptocurrency token called Ether. All put together, some would consider Ethereum as an advanced form of Bitcoin.
Ethereum is an open blockchain platform that lets anyone build and use decentralized applications that run on blockchain technology. ~ethdocs.org
Brief Overview Of Ethereum’s History:
The original idea of Ethereum was initially described by none other than Vitalik Buterin in late 2013. He was known prior-to Ethereum (and still is) as being heavily involved in the Bitcoin community, this experience of his helped spark this new concept. Shortly afterwards, Buterin published the Ethereum Whitepaper, and shortly after that formally announced the platform at The North American Bitcoin Conference in Miami, Florida, in January of 2014. On the 23rd of the same month, Vitalik presented Ethereum to the Bitcoin community. You can see that thread on bitcointalk.org here. On the same day, Coindest.com published an article on Ethereum.
It was around this time, that Buterin began working with Dr. Gavin Wood, who become co-founder of Ethereum. He “coded the first functional implementation of Ethereum.” He also published the Ethereum Yellow Paper by April of 2014. This paper served as the technical specs for the Ethereum Virtual Machine (or EVM). Another core developer to join the team alongside Buterin and Dr. Wood was Jeffrey Wilcke, who was the “Lead Go developer” according to the original post on bitcointalk.
Other important people (non-developers), included:
–Stephan Tual: the Founder of Ursium, and in charge of communications.
–Mihai Alisie: Founder of Bitcoin Magazine and Egora.
–Joseph Lubin: Software engineer and Quantitative Analyst.
–Anthony Di Iorio: Founder and Executive Director of the Bitcoin Alliance of Canada, Bitcoin Decentral, and Kryptokit.
Now, starting a brand new blockchain and cryptocurrency is a LOT of work, and there’s no guarantees that all will go smoothly. So, Ethereum decided to make a presale of their ether token on July 22, 2014 – which they announced on the Ethereum blog. In reality, they had conducted the first ever ICO, or Initial Coin Offering, quite similar to an IPO (Initial Public Offering). To date, Ethereum’s ICO holds the record for raising the highest amount of funds at $18,439,086 dollars. You can see stats of the presale here.. The complexity of doing this, both legal and financial, led to several legal entities being formed. One of these entities was: the Ethereum Foundation (Stiftung Ethereum), established in Zug, Switzerland, on June 2014. Their main purpose is the management of the funds which were raised during the presale, and according to their page
… the promotion of developments of new technologies and applications, especially in the fields of new open and decentralized software architectures.
In order to continue Ethereum’s development, and grow it’s community base, ETH DEV (a non-for-profit organization) was formed, under contract from Ethereum Suisse. Buterin, Dr. Wood, and Wilcke became the directors of this organization as well. Through this organization, they delivered their series of proof of concept (PoC) releases for the development community to look at. Excitement and momentum steadily grew as they released posts frequently throughout 2014. The Ethereum subreddit and Ethereum forum have been steadily growing in traffic and in their user-base. The platform is growing in popularity.
Berlin, November 2014: the DEVCON-0 event was put together by ETH DEV. The event brought together developers of Ethereum from all over the globe, to discuss a broad scope of topics concerning Ethereum technology. The event proved to be very successful, and had long lasting effects which greatly improved Ethereum, helping to make it more scalable, secure, and reliable. The event helped to excite developers as they continued towards launching the platform. You can see the event’s talks here and Reddit post here.
DEVCON1 has since taken place as well. Vitalik made known his desire for a decentralized internet, and is noted as saying that: “We can fix the internet – and we can do it this week.” DEVCON2 has also taken place, here’s a video from that conference, back in 2016. And here’s a great overview of the conference by Coindesk.
The DEVgrants Program was announced in April of 2015. This program rewards developers who decide to contribute to the Ethereum platform, as well as to projects based on/around Ethereum, by granting them funding for their work. Many developers had already been contributing their time and energy, so this program has really helped to reward many of them for their efforts.
2014 – 2015 saw a series of proof of concept releases to help with development. Olympic was the 9th POC. It invited the developer community to test the limits of the systems and see if they could break it. Rewards were given to those who did the best job in this endeavour – winners announcement here. The Ethereum Bounty Program was launched in 2015, which offers Bitcoin rewards for those who can find any sort of vulnerability within Ethereum software. This has led to a stronger platform, and stronger trust from the community. And again, from 2014 – 2015, Ethereum had third party software security firms conduct full audits of all protocol-critical components. This also helped to create a stronger platform, as security issues that were found were fixed and tested again. You can see an announcement by one of the companies here, as well as an announcement by Ethereum concerning the announcement here.
July 30th of 2015, Ethereum Frontier was launched! Decentralized apps and smart contracts began to be written by developers to be put onto the Ethereum network. Miners also started to join the network to earn ether by mining blocks and to help secure the Ethereum blockchain. This was only supposed to be a Beta version for developers, it turned out to be much better than anyone had expected, and more developers since then have come to the aid of the Ethereum ecosystem, creating new solutions for it. The original release can be read here.
For more information on the history of Ethereum, and more to get more links, visit ethdocs.org.
On Friday August 7th, 2015, Ethereum hit the exchange, initially at around $2.83, however the price quickly dropped, and remained below $1.00 for much of the year. 2016, saw the rise in price for Ethereum, it’s highest point reaching around $19.42 on June 16th. Much of the year saw double digit numbers, averaging around $10.00. January 1st of 2017, started the year at about $8.24, however, today, Ethereum has incredibly risen to around $42.28 as of March 23rd, 2017!
The highest price this year happened on March 17th, at around $47.81!
How Does Ethereum Work?
We mentioned Smart Contracts at the beginning of this article. Smart Contracts are essentially the heart of Ethereum, and aside from having it’s own custom blockchain network (refer to the beginning of the article), these are what makes Ethereum… Ethereum. Smart Contracts are digital “contracts” that can be programmed to carry out a particular function, transaction, etc, at a given particular time or after a certain set of criteria have been met. You could, if you so chose, construct a business agreement, and have the contract automatically execute the terms of the agreement, without the need of a middle man to intervene.
Ethereum also makes a new type of application available by a network of participating computers. They are called dApps, which are decentralized applications. For example, on a theoretical messaging application called WhatsDapp, a message from me to you would be dispersed among many different individual computers, each one receiving a piece of the message, and it would be reassembled as it came to your device. The owners of these computers are lending their processing power in exchange for ether. This stands in contrast to where, say, if you were using the well known WhatsApp, my message to you gets processed through a centralized data bank, saved (perhaps forever, and perhaps available for anyone to see), and then it gets sent to you. This is the difference between centralized and decentralized. You may view a wonderful short infographic on this subject in the comments section of this page.
Ethereum works a lot like Bitcoin, however it has many new innovations, modifications, and distinctions of it’s own. For those who love the nitty-gritty, you can see a much more detailed review of exactly how Ethereum is run in this article by Ethdocs.org. And here’s another great article on the subject, written by Coinfox.info.
DinarDirham and Ethereum:
There are many projects which have been made possible by using Ethereum. DinarDirham for example, which is a digital gold fintech provider, uses the Ethereum blockchain to record and provide transparency to our digital products, such as our DinarCoins and Gold Smart Contracts. We are truly grateful for this amazing technology, which has helped play a role in making DinarDirham a reality.
Ethereum is a relatively new platform and an exciting new technology in the Fintech and blockchain fields. It’s been tested and tried, and pushed to it’s limits for the purpose of making it the best that it can be. We certainly look forward to seeing it’s growth in the future, and what else it brings to the table.
We hope you enjoyed this article,
Have a wonderful day,
The DinarDirham team.