How Do Ethereum Smart Contracts Work?
Like many ideas in the blockchain industry, a general confusion shrouds so called 'smart contracts'. A new technology made possible by public blockchains, smart contracts are difficult to understand because the term partly confuses the core interaction described. While a standard contractoutlines the terms of a relationship (usually one enforceable by law), a smart contract enforces a relationship with cryptographic code. Put differently, smart contracts are programs that execute exactly as they are set up to by their creators. First conceived in 1993, the idea was originally described by computer scientist and cryptographer Nick Szabo as a kind of digital vending machine. In his famous example , he described how users could input data or value, and receive a finite item from a machine, in this case a real-world snack or a soft drink. In a simple example, ethereum users can send 10 ether to a friend on a certain date using a smart contract (Seeour guide" What is Ether? "). In this case, the user would create a contract, and push the data to that contract so that it could execute the desired command. Ethereum is a platform thats built specifically for creating smart contracts. But these new tools arent intended to be used in isolation. It is believed that they can also form the building blocks for 'decentralized applications' (See: " What is a Dapp? ")and even whole decentralized autonomous companies (See:" What is a DAO? ') Its worth noting that bitcoin was the first to support basic smart contracts in the sense that the network can transfer value from one person to another. The network of nodes will only validate transactions if certain conditions are met. But, bitcoin is limited to the currency use case. By contrast, ethereum replaces bitcoin's more restrictive langu Continue reading >>
How Ethereum Works - Coindesk
CoinDesk Launches 2017 Year in Review Opinion and Analysis Series Now that we've covered what ethereum is, let's dive deeper into how the platform functions under the hood. Consider the online notebook application described in " What is Ethereum? " Using ethereum, the appdoesn't require one entityto store and control its data. To accomplish this, ethereum borrows heavily from bitcoin's protocol and its blockchain design, but tweaks it to support applications beyond money. Ethereum aims to abstract away bitcoin's design, however, so that developers can create applications or agreements that have additional steps, new rules of ownership, alternative transaction formats or different ways to transfer state. The goal of ethereum's 'Turing-complete' programming language is to allow developers to write more programs in which blockchain transactions could govern and automate specific outcomes. This flexibility is perhaps ethereum's primary innovation, as explained in the guide " How Ethereum Smart Contracts Work ". The structure of the ethereum blockchain is very similar to bitcoin's, in that it is a shared record of the entire transaction history. Every node on the network stores a copy of this history. The big difference withethereum is that its nodes store the most recent state of each smart contract, in addition to all of the ether transactions. (This is much more complicated than described, but the text below should help you get your feet wet.) For each ethereum application, the network needs to keep track of the 'state', or the current information of all of these applications, including each user's balance, all the smart contract code and where it's all stored. Bitcoin uses unspent transaction outputs to track who has how muchbitcoin. While it sounds more complex, the id Continue reading >>
Why Is Ethereum Different To Bitcoin?
Ethereum differs from Bitcoin in 7 main ways: 1. In Ethereum the block time is set to 14 to 15 seconds compared to Bitcoins 10 minutes. This allows for faster transaction times. Ethereum does this by using the Ghost protocol. 2. Ethereum has a slightly different economic model than Bitcoin Bitcoin block rewards halve every 4 years whilst Ethereum releases the same amount of Ether each year ad infinitum. 3. Ethereum has a different method for costing transactions depending on their computational complexity, bandwidth use and storage needs. Bitcoin transactions compete equally with each other. This is called Gas in Ethereum and is limited per block whilst in Bitcoin, it is limited by the block size. 4. Ethereum has its own Turing complete internal code... a Turing-complete code means that given enough computing power and enough time... anything can be calculated. With Bitcoin, there is not this form of flexibility. 5. Ethereum was crowd funded whilst Bitcoin was released and early miners own most of the coins that will ever be mined. With Ethereum 50% of the coins will be owned by miners in year five . 6. Ethereum discourages centralised pool mining through its Ghost protocol rewarding stale blocks. There is no advantage to being in a pool in terms of block propagation. Continue reading >>
Bitcoin Vs Ethereum: Driven By Different Purposes
Bitcoin Vs Ethereum: Driven by Different Purposes Ethereum has received a lot of attention since its announcement at the North AmericanBitcoinConference in early 2014 byVitalikButerin. The natural consequence of its rising popularity has been its constant comparison toBitcoin, the first virtual currency. It is important for investors to understandthe similarities and differences between BitcoinandEthereum. Bitcoin, the first virtual currency, was born seven years back. It introduced a novel idea set out in a white paper by the mysterious SatoshiNakamoto:Bitcoinoffers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government issued currencies . There are no physicalBitcoins , only balances associated with public and private keys. Over these years, the acceptance of the concept of a virtual currency has increased among regulators and government bodies.Althoughit isnt a formally recognized medium of payment or store of value, it has managed a niche for itself and continues to coexist in the financial system despite being regularly scrutinized and debated. The attempts to understandBitcoinmoreclosely resulted in the discovery of blockchain , the technology that powers it. Theblockchainis not just the hottest topic in theFinTechworld but also asought after technology in many industries. Ablockchainis a public ledger of all transactions in a given system that have ever been executed. It is constantly growing as completed blocks are added to it. The blocks are added to theblockchainin linear, chronological order through cryptography, ensuring they remain beyond the power of manipulators. Theblockchainthus stands as a tamper-proof record of all transactions on the network, accessible to all Continue reading >>
What Is Ether?
Ether is a necessary element a fuel for operating the distributed application platform Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations. To put it another way, ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources). If you just want to test the technology, you probably don't need real ether. Download the latest Wallet app and switch to the Test Network Check your ether presale balance safely here: The total supply of ether and its rate of issuance was decided by the donations gathered on the 2014 presale. The results were roughly: 60 million ether created to contributors of the presale 12 Million (20% of the above) were created to the development fund, most of it going to early contributors and developers and the remaining to the Ethereum Foundation 5 ethers are created every block (roughly 15 seconds) to the miner of the block 2-3 ethers are sometimes sent to another miner if they were also able to find a solution but his block wasn't included (called uncle/aunt reward) Note that after the Byzantium update is implemented, the mining and uncle reward is reduced to 3 ethers and 0.625-2.625 ethers, respectively. No. According to the terms agreed by all parties on the 2014 presale, issuance of ether is capped at 18 million ether per year (this number equals 25% of the initial supply). This means that while the absolute issuance is fixed, the relative inflation is decreased every year. In theory, if this issuance was kept indefinitely then at some point the rate of new tokens created every year would reach the average amount lost yearly (by misuse, accidental key Continue reading >>
Ethereum Cryptocurrency: Everything A Beginner Needs To Know
Ethereum Cryptocurrency: Everything A Beginner Needs To Know By: Sudhir Khatwani In: Ethereum Last Updated: In the cryptocurrency world, if Bitcoin is the king, then Ethereum is the queen. The price of Ethereum (ETH) has risen significantly in past few months, and its one of the most promising cryptocurrenciesright now. In this article I will help you understand everything about Ethereum & you would learn all important things that you should know as a beginner. Before that, Consider you have just booked an Uber ride and a driverless car has come to pick you up. That car takes you to the gasoline station and self-pays for its fuel with the money it earned from the previous ride. Afterward, this car takes you to your destination, and the trip fare is auto-deducted from your Uber wallet. While driving you to your destination, the car also self-paid its annual insurance fee and its monthly liability fee on behalf of its (human) owner. After it drops you off, itdrives itself to a mechanic for some repairs. You might be thinking I am telling you a scene from a Sci-Fi movie. Butto your surprise (and mine), I am not!! Such things are being tested, and the use of cryptocurrencies like Ethererum and technology like the Ethereum blockchain are the reasons that something like this can happen. Such autonomy is the direct effect of the theories behind cryptocurrencies. So to be able to digest this futuristic scenario, lets understand Ethereum. As the official Ethereum project websitesays: Ethereumis a decentralized platform for applications that run exactly as programmed without any chance of fraud, censorship, or third-party interference. But whats special about that? All software runs as it was programmed to do so Well, the code written on the Ethereum blockchain cant be altered, Continue reading >>
Blockchain - How Would I Explain Ethereum To A Non-technical Friend? - Ethereum Stack Exchange
How would I explain Ethereum to a non-technical friend? I've recently attempted to explain Ethereum to several non-techy friends. My explanation usually involves starting with a comparison to Bitcoin, but this quickly becomes complicated as I then have to explain the backstory of how the Bitcoin blockchain works, which is similarly technical in nature. Is there a better way to describe the general concepts of Ethereum to non-techies? Are there any analogies I can make to things that are less technical in nature? Or is it just the case that the technology is quite complicated...? Ethereum is a world computer [ 1 ] and might change how we interact, just like the internet did, 20 years ago. Like Bitcoin, it is based on a block chain, but Ethereum is more than just a currency: Secure backbone for e-commerce and the Internet of Things Integrated development environment for debugging, development and deployment of Ethereum applications Free software - all released under the General Public Licence (GPL) The substantive content of your Answer was almost entirely in a linked video and therefore unavailable in this StackExchange. There was no attempt to summarize the salient points of the video. user75798 Jan 20 '16 at 21:25 Brilliant! I was having trouble to understand it myself Zorgatone Jan 21 '16 at 13:44 Many parts of Ethereum software are not released under the GPL. E.g. pyethereum , evmjit . Pawe Bylica Mar 9 '16 at 19:14 This answer isn't that sexy. For us who understand, it says everything. But for someone new: "Transparent, why is that cool? I expect all services to be secure. Paypal is secure and something license." Not being a hater in any way, just trying to find more of a elevator pitch which makes the other person go "Aha!" Jon Ramvi Aug 23 at 12:45 It depends on Continue reading >>
You are responsible for your own computer security. If your machine is compromised you will lose your ether, access to any contracts and possibly more. You are responsible for your own actions. If you mess something up or break any laws while using this software, it's your fault, and your fault only. You are responsible for your own karma. Don't be a jerk and respect the rights of others. What goes around comes around. The user expressly knows and agrees that the user is using the Ethereum platform at the users sole risk. The user acknowledges that the user has an adequate understanding of the risks, usage and intricacies of cryptographic tokens and blockchain-based open source software, eth platform and ethereum The user acknowledges and agrees that, to the fullest extent permitted by any applicable law, the disclaimers of liability contained herein apply to any and all damages or injury whatsoever caused by or related to risks of, use of, or inability to use, ethereum or the Ethereum platform under any cause or action whatsoever of any kind in any jurisdiction, including, without limitation, actions for breach of warranty, breach of contract or tort (including negligence) and that neither Stiftung Ethereum (i.e. Ethereum Foundation) nor Ethereum team shall be liable for any indirect, incidental, special, exemplary or consequential damages, including for loss of profits, goodwill or data that occurs as a result. Some jurisdictions do not allow the exclusion of certain warranties or the limitation or exclusion of liability for certain types of damages. Therefore, some of the above limitations in this section may not apply to a user. In particular, nothing in these terms shall affect the statutory rights of any user or exclude injury arising from any willful misconduct Continue reading >>
What Is Ethereum? What Is Ethereum Mining & How Does It Work?
What is Ethereum? What is Ethereum Mining? Jordan Tuwiner Last updated July 13, 2017 Ethereum is more than a cryptocurrency. Its an open source shared world computing platform. A world computer that allows for the decentralized verification of transactions for any Turing-viable implementation. Thanks to Ethereum, Blockchain technologies are now easy to employ without having to reinvent the wheel. It is clear that Ethereum grew out of desire to apply Bitcoin/Blockchain concepts to realms outside of money. As a result, it provides open source platform to developers who seek to write decentralized applications. This appeals to developers who seek an easy introduction to Blockchain projects A series of innovative features definite Ethereum. As a result of its extended capabilities, Ethereum comes with two types of accounts . EOA, or Externally Owned Accounts, provide bitcoin-like capabilities such as providing a balance that is secured by private keys. Contract Accounts provide the Turing Complete room for application development that makes the protocol so desirable. These accounts are used as holding objects to constitute Smart-contracts which provide Ethereums capability for accommodating decentralized autonomous organizations; a way of structuring organizations without a vulnerable center. Most importantly, Ethereum capitalizes on the realization that consensus allows for currency and currency allows for consensus by providing economic incentive. As such, verifications are paid for on a pay-per-use basis, a system that replaces mining as we know it from Bitcoin. Ethereum right now uses PoW mining to secure its chain. Vitalik Buterin, the creator of Ethereum, stressed that his idea was fueled by the desire to [Avoid] the swiss-army knife protocol . That is to say that us Continue reading >>
How Does Ethereum Work? Michele D'aliessi Medium
The logic and mechanics behind Ethereum explained in simple words. Ethereum is a platform on which anyone can build unstoppable, decentralised applications. If you have never heard of Ethereum or if you dont know what it can be used for, I would strongly recommend to read What is Ethereum? before digging deeper and exploring how it works in this article. The ultimate guide to understand Ethereum in simple words.medium.com The purpose of this article is to explain how Ethereum works by providing a general and non-technical overview of its logic and inner mechanics. Please keep in mind that what is described below is a simplified version of what actually happens, but it should be technical enough to give you a general understanding of how it works. Should you have any questions please write them as comments or private notes, it would help me refine this article over time and make it much clearer for future readers. We can see Ethereum as a stack of few layers built on top of each other. The first, basic layer that makes everything else possible is a large network of computers that process transactions and keep a shared database updated over time (the Ethereum blockchain). The second, is the software layer that allows developers to run programs called smart contracts on the Ethereum blockchain, using a programming language called Solidity . The third layer is made of applications that offer different services (from governance to identity management) to Ethereum users. The remarkable feature of this platform is that by leveraging the Ethereum hardware and software layers these applications are decentralised, lack a central point of failure and are somehow unstoppable. You just cant switch them off. Lets explore each of these layers in detail. Fig. 1 - The different layers Continue reading >>
How Does An Ico Work
Initial Coin Offerings can be considered as an alternative form of crowdfunding that has emerged outside of the traditional financial system. This model has helped a lot of successful projects and companies get the funding required to start their business. In 2013, over US$5.1 billion were raised via crowdfunding worldwide,which increased to US$16 billion in 2014 and was estimated at over US$34 billion in 2015. Initial Coin Offerings, also known as ICOs is the cryptocurrency version of crowdfunding andare a part of the crypto world that is most likely here to stay. It's one of the easiest and most efficient methods for companies and individuals to fund their projects and for regular users to invest in projects they see value in. An Initial Coin Offering is an event that usually extends over a period of one week or more and in which everyone is allowed to purchase newly issued tokens in exchange for established cryptocurrencies like Bitcoin (BTC) or Ether (ETH). In an ICO, there can be a specific goal or limit for project funding, meaning that every token will have a pre-designated price that will not change during the Initial Coin Offering period, which also means that the token supply is static. It is also possible to have a static supply with a dynamic funding goal, in which the distribution of tokens will be made according to the funds received, meaning that the more funds the project receives the higher the token price will be. You can also have a dynamic token supply that will be determined by a number of funds that are received, meaning that the price for each token is static (e.g 1 ETH 1 token) but every time one Ether is sent a new token is created. A limit can be set in terms of goals or time frame. Analyzingexamples of relevant ICOs, one can piece together wh Continue reading >>
A Laymans Guide To Ethereum: How It Works And Why It Matters
A laymans guide to Ethereum: how it works and why it matters While Bitcoin has been the landmark of cryptocurrency, Ethereum too has emerged from the shadows in the last few years as a worthy competitor. Proposed by Vitalik Buterin in 2013 and launched in 2015, Ethereum has taken the application of blockchain technology to new heights. While Ethereum is a cryptocurrency, it is not the same as Bitcoin. We take you through the basics of what Ethereum is, how it works, and why it matters. If you are new to the world of cryptocurrency, then you can refer to this basic guide before moving forward with this article. What is Ethereum and how is it different from Bitcoin? The first thing to know is that cryptocurrencies like Bitcoin or Ethereum are one of the many applications that are supported by blockchain technology, in the same way that email is only one of the many applications of the internet. Essentially a distributed public blockchain network that runs the programming code of decentralised applications (Dapps), Ethereum goes beyond being a cryptocurrency in terms of both purpose and ability. Bitcoin is a decentralised application that creates a P2P cash system, wherein users can transact in bitcoins. On the other hand, Ethereum allows developers to build and launch decentralised applications for any purpose of theirs, including creating their own cryptocurrencies. By distributing the processing power required to run these programmes between peers on the network, Ethereum essentially acts as a blockchain supercomputer. Moreover, due to the principle of consensus, apps on the network run exactly as programmed without any possibility of censorship, downtime, fraud, or third-party interference. The Ethereum network is fuelled by a currency called Ether. Not only is Ether Continue reading >>
What Is Ethereum?
Ethereum is a decentralized ledger protocol and a platform that promises unprecedented opportunities for developers of applications running on blockchain, both financial and non-financial. Ethereum is a decentralized ledger protocol and a platform that promises unprecedented opportunities for developers of applications running on blockchain, both financial and non-financial. Ethereum, eth, cryptocurerncy, decentralized Ethereum is a platform for creation of decentralized applications running on blockchain, through the use of smart contracts. Since its launch on June 30, 2015 , it has been steadily gaining popularity . Starting from late January 2016, it has experienced a surge. In March 2016, within less than a year of its existence, that growth culminated in Ethereum achieving a record-breaking market capitalization of over $1B . Since then, the passions have subsided and Ethereum has declined a bit. However, the coin is now second only to Bitcoin on the cryptocurrency market capitalization list. - The graphical representation of how Ethereum has been killing it Bitcoin has undergone a similar explosion of growth in the late 2013 - early 2014, when its price has reached its all-time high . Launches of several hundreds, if not thousands of different kinds of alternative cryptocurrencies followed. Some of those altcoins have managed to reach a certain degree of success, but none of them have achieved the heights of Ethereum. The platform has even enjoyed Microsofts attention, when it announced the launch of Ethereum Blockchain as a Service (EBaaS) based on the Microsoft Azure platform back in November 2015. Now the reader might be wondering: why did all of that happen? Well heres the short version: Ethereum is decentralized, like Bitcoin, but is capable of much, much mo Continue reading >>
What Is Ethereum? - Coinbase
Ether is a digital currency used for operating smart contracts on the Ethereum network. Like Bitcoin, the Ethereum network and Ether tokens are not controlled or issued by any bank or government - instead it is an open network which is managed by its users. Ethereum has been deployed in different phases. Currently the Ethereum project is in the 2nd phase, called “Homestead”. The 4 planned phases for the growth of the Ethereum network are, in order: Frontier, Homestead, Metropolis, and Serenity. Ethereum Homestead clients are working smoothly after being in beta for several months without any major incidents. However, Ethereum is still an experimental technology. Since it allows for programs to run on a virtual machine, it’s still possible that some things may still go wrong, such as poorly written smart contracts that contain bugs. While Bitcoin allows you take part in a global financial network, using Ethereum you can participate in a global computational network. This is done by means of smart contracts, which are scripts of code that can be deployed in the Ethereum blockchain. Although smart contracts are still a very new technology, they have a wide range of potential applications in many different areas, such as voting, global supply chains, medical records, the financial system, and possibly others that have yet to be discovered. The value of Ethereum is not tied or pegged to the value of any other currency. Similar to stocks or property, Ethereum's value is determined by buying and selling in the open market. The price of Ethereum changes in real time based on the number of people who want to buy or sell it at a given moment. Ethereum is traded for bitcoin, dollars, euros, yen, and other currencies in real time 24 hours a day. Depending on the demand for b Continue reading >>
Bitcoin And Ethereum Have A Hidden Power Structure, And Its Just Been Revealed
Bitcoin and Ethereum have a hidden power structure, and its just been revealed Close examination reveals how power is being consolidated across their networks. In cryptocurrency circles, calling something centralized is an insult. The epithet stems from Bitcoin creator Satoshi Nakamotos revelation: a monetary system doesnt need a central authority, like a government, to work. Thats such a potent idea that its morphed into a battle among crypto-enthusiasts between goodthat is, decentralized currencies and evil ones, or anything with a whiff of centralization, that are assumed to threaten the utopian view of cryptocurrencies as the vehicle for a new financial world order. Do these arguments hold any water? Emin Gn Sirer , a cryptocurrency expert at Cornell University, says in many cases the jurys still outmainly because no ones bothered to take a hard look at how decentralized these networks actually are. This piece first appeared in our new twice-weekly newsletter, Chain Letter, which covers the world of blockchain and cryptocurrencies. Sign up here its free! We dont have any real metrics yet. he says. His group aims to help change that with newly published results from a two-year-long study focused on Bitcoin and Ethereum, the worlds most popular cryptocurrency networks. Can a booming crypto-currency really compete with conventional cash? Perhaps the most striking finding is that the process of verifying transactions and securing a blockchain ledger against attack, called mining, is not actually that decentralized in either system. Bitcoin and Ethereum are open blockchain systems, meaning that in principle anyone can be a miner (see What Bitcoin Is, and Why It Matters ). But organizations have formed to pool mining resources. The researchers found that the top four Bit Continue reading >>