At its simplest, Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications. If you are completely new to Ethereum you should take some time to watch a video by Vitalik Buterin one of the founder of Ethereum.
Ethereum’s blockchain contains two types of objects, wallets which are used for holdings Ethereum (similar to Bitcoin wallets) and smart contracts which are similar to wallets in the way they can hold currency but are made of code. Once a smart contract code is deployed to the blockchain, it is executed by the network. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counter party risk.
A wallet or a smart contract can send transactions to the network. By making a transaction to a wallet, you will simply transfer funds to this wallet. If you initiate a transaction to a smart contract, it will trigger the code of the smart contract.
Who runs the code?
If you initiate a transaction, it will be submitted to the blockchain and will be executed once miners integrate your transaction in a freshly mined block in exchange of a small fee (gas price). The code runs into the Ethereum Virtual Machine which provides a powerful execution environment for decentralized applications.
What are the benefits of Ethereum decentralized Platform?
Because decentralized applications run on the blockchain, they benefit from all of its properties.
- Immutability – A third party cannot make any changes to data.
- Corruption & tamper proof – Apps are based on a network formed around the principle of consensus, making censorship impossible.
- Secure – With no central point of failure and secured using cryptography, applications are well protected against hacking attacks and fraudulent activities.
- Zero downtime – Apps never go down and can never be switched off.
What’s the downside of decentralized applications?
Despite bringing a number of benefits, decentralized applications aren’t faultless. Because smart contract code is written by humans, smart contracts are only as good as the people who write them. Code bugs or oversights can lead to unintended adverse actions being taken. If a mistake in the code gets exploited, there is no efficient way in which an attack or exploitation can be stopped other than obtaining a network consensus and re-writing the underlying code. This goes against the essence of the blockchain which is meant to be immutable. Also, any action taken by a central party raises serious questions about the decentralized nature of an application.
To learn more about Ethereum:
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