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What is Ethereum

Published days ago on July 31, 2020
By Anton Kovačić

In today's world, our personal information is stored on servers and cloud hosting owned by other companies like Google, Amazon, and Facebook. While this arrangement has many conveniences, there are also many vulnerabilities. Governments and hackers can gain access to your files by hacking a third-party service and leaking, stealing, or changing your data.

The internet was always intended to have a decentralized structure, and a revolution has come with new technologies and tools, including blockchain, to reach this goal.

Ethereum is one of these technologies.

Bitcoin was created to shake up the online banking system and PayPal. Ethereum was developed to use blockchain to replace third parties on the internet, like companies that store complex financial data.

A World Computer

Ethereum has a focus on becoming a world computer to decentralize the client-server model.

Servers and cloud systems are substituted with thousands of nodes run by volunteers all over the world with Ethereum.

Their vision is to allow the functionality to people globally so that they can complete in a marketplace within the infrastructure.

With app stores, your personal data like your past purchases, credit card information, address, phone number, and other sensitive data is stored and controlled by a third-party company.

In addition, Google and Apple store, display, and censor the particular mobile apps you have access to download. There are also other services like Google Docs or Evernote for creating and storing documents.

Ethereum wants to return control of this data to the rightful owners and reinstate creative rights to the authors of the content. The idea is to give the rights back to the content owners so that apps can no longer suddenly be banned, or notebooks are not temporarily taken offline. The intent is to give control back to the user to make changes, not the entity.

A decentralized application is an open marketplace that connects providers and users directly without the interference of a third party like Google or Apple. There are no middlemen to store or manage a user's data. This can benefit users from having their information compromised, sold against their knowledge, used for the benefit of the company, censored, or otherwise misused.

Ethereum has three different kinds of decentralized applications include apps involving money, apps that manage money, and apps that include governance and voting systems.

Ethereum wants to restore the control that people had over their own data in the past and mold it with the easy to access information that we have become accustomed to today in the information age. Whenever you make changes, save, or delete notes, all of the network nodes make the changes too.

There are many people that are skeptical about this idea as it's not clear which particular blockchain applications will be secure, useful, or scalable and as convenient as the mobile applications we have today.

Using Ethereum

Using Ethereum can be a rewarding experience, although it might appear to be intimidating.

If everything works out, there could be viable alternatives to Google, Apple, and Facebook. While Ethereum may not be as vast as the internet, most anyone who owns ether, which are unique segments of code that allow blockchain ledger updates, a smartphone, and a computer, can access and use the platform.

Wallets for Ethereum

Ethereum wallets allow you to store your ether or private keys securely. It's essential to hold onto your private key so that you don't lose your ether altogether. Private keys cannot be recovered if lost.

There are two caveats to removing trusted parties because there is no one to assist in recovering your secret key.

There are many different wallet options to store cryptocurrency. There are paper, web, hardware, and desktop wallets available.

When you select a wallet, it is a personal choice of security and convenience. There are generally two concepts to consider as when they are more convenient, they lack security features, or when they are very secure, they are usually less convenient.

Paper Wallets

Paper wallets are printable, or you can write your private key on a piece of paper to make a paper wallet. There are tools online to create key pairs right from your computer, and not on a site's server that could leave your data unsecured against hackers.

If you have the right cryptographic packages installed, it is possible to create these keys by going through the command line.

Hardware Wallets

Hardware wallets are small and offer security and convenience. They are secure devices that can be removed from the internet. It is like having a portable deposit box.

They can also sign transactions without the internet. It might not be the option for you if you move around a lot, or you need to use ether on a regular basis.

Desktop Wallets

A desktop wallet runs from your desktop or laptop computer. You can download a copy of the whole Ethereum blockchain, which will take a few days and will increase as Ethereum grows. You will then need to sync your transactions on to the blockchain.

Mobile Wallets

Mobile wallets use less data to link to the system for transactions and are perfect for smartphone downloads. While it is convenient, it is not as secure.

It is more secure to store keys that are private on a mobile device that is not connected to the internet because it is more difficult to hack. This is the best strategy for storing larger ether holdings.

In addition, ether is more difficult to use on a computer or mobile device that is connected to the internet.

With any of these choices, it is still possible to lose your private key permanently – so you will want to be aware and take the proper precautions.

One of the best solutions is to take some time and create multiple copies of private keys and store them in many secure locations so you can increase your chances of finding it.

Purchasing Ether

The process of buying ether is different based on each individual country and currency. You will need to locate someone wanting to trade it.

There are Ethereum meetups in big metropolitan cities like New York, Chicago, or Toronto, where you can meet in person to purchase or sell ether.

You can also buy on exchanges that allow people to purchase either with money or bitcoin, and there is a process to enroll and get started. If using a different currency, there may be additional steps to take to begin.

Bitcoin is the most popular cryptocurrency, and people all over the world may want to use their country's currency for trading. It is useful to use a reliable currency conversion calculator and use an exchange to buy bitcoin and trade it for ether.

Ether can be sent to another person through a peer-to-peer system, generally for a small transaction fee.

What Happens Next?

Once a user has ether, they can sign up and develop smart contracts that don't depend on a third party, and by using smart contract bundles to produce decentralized applications or dapps that users can use or join.

Ethereum lets developers produce smart contracts in a language called Turing complete.

Smart contracts are similar to accounts that require more than one signature so that ether is only spent when a required number of users agree on spending.

They can also store information like data on membership records or domain registrations.

Smart contracts can also function as a software library. There can be agreements created with smart contracts.

How Does the System Work?

Cryptocurrency lets you create identification numbers that direct where to debit funds. Public and private keys are required for identification and transactions. These keys are generally linked by cryptography.

Public keys can be sent to other people so they will gain the ability to send your money, and you will need an address for them to send you ether – this would be a scrambled public key.

When spending ether, you will need to sign over your funds using your private key. The private key is very similar to a password or your ATM pin number – only it cannot be recovered once it is lost.

The benefit of the system is that with open blockchains, users can create an ID number for their funds around the clock. There is no need for bank approval.

What is Ethereum