What on earth is Ethereum. I mean, I keep hearing about it all the time. I've seen it's the second-largest cryptocurrency around but I just can't seem to wrap my head around it. Is it as revolutionary as Bitcoin can it actually change the world as we know it? If you want to have a better understanding of Etherium but are tired of explanations. So today I going to explain Ethereum.
Before we get into Etherium we need to do a quick recap about Bitcoin, since it's the basis from which Etherium was born. By now you probably know that Bitcoin is a form of decentralized money, and if you still have some questions about what that means or how it works, then you might consider revisiting our original video, what is bitcoin before Bitcoin was invented, the only way to use money digitally was through an intermediary like a bank or PayPal, even then, the money used was still government-issued and controlled currency, however, Bitcoin changed all that by creating a decentralized form of currency that individuals could trade directly without the need for an intermediary each Bitcoin transaction is validated and confirmed by the entire Bitcoin network, there's no single point of failure so the system is virtually impossible to shut down manipulate or control. Pretty neat, huh. Well, now that we know that money can be decentralized, what other functions of society that are centralized today would be better served on a decentralized system. What about voting. Voting requires a central authority to count and validate votes, real estate transfer records currently use centralized property registration authorities, social networks like Facebook are based on centralized servers that control all of the data we upload to them. What if we could use the technology behind bitcoin more commonly known as blockchain to decentralize other things as well. The interesting thing about blockchain technology is that it's actually the byproduct of the Bitcoin invention blockchain technology was created by fusing already existing technologies like cryptography, proof of work, and decentralized network architecture together in order to create a system that can reach decisions without a central authority. There was no such thing as blockchain technology before Bitcoin was invented, but once Bitcoin became a reality, people started noticing how and why it works and named this thing blockchain technology blockchain is to Bitcoin, what the internet is to email a system on top of which you can build applications and programs, a currency like Bitcoin is just one of the options, so this got people very excited, and they began to explore what else can we decentralize. However, in order for a system to be truly decentralized, it means a large network of computers to run it. Back then, the only network that existed was Bitcoin, and it was pretty limited. Bitcoin is written in what is known as a Turing incomplete language which makes it understand only a small set of orders like who sent how much money to whom. If you want to create a more complex system, you will need a different programming language, which means a different network of computers. Imagine for a second you wanted to build your own decentralized program, just like Bitcoin at home. You need to understand how bitcoins decentralization works, write code that mimics the same behavior, get a huge network of computers to run this code, and so on, and that is a lot of work.
Enter Ethereum Ethereum was first proposed in late 2013, and then brought to life in 2014 by Vitalik Butera, who at the time was the co-founder of Bitcoin magazine Ethereum is the do it yourself platform for decentralized programs, also known as daps decentralized applications. If you want to create a decentralized program that no single person controls, not even you even though you wrote it. All you have to do is learn the Ethereum programming language called solidity and begin coding the Ethereum platform has 1000s of independent computers running it, meaning it's fully decentralized once a program is deployed to the Etherium network. These computers, also known as nodes will make sure it executes, as written. Ethereum is the infrastructure for running daps worldwide, it's not a currency, it's a platform, the currency used to incentivize the network is called ether but more on that later. Ethereum his goal is to truly decentralize the internet. Wait, the internet is centralized. I thought the internet already was decentralized and that anyone can start their own site. While in theory that might be true. In practice, Amazon, Google, Facebook, Netflix, and other giants control most of the worldwide web, as we know it. There's almost no activity on the web that happens without some sort of intermediary or third party. But once the concept of digital decentralization was demonstrated by Bitcoin, a whole new array of opportunities, became available, we can finally start to imagine and design an internet that connects users directly, without the need for a centralized third party. People can rent hard drive space directly to other people and make Dropbox, obsolete, drivers can offer services directly to passengers and remove Uber as the middleman. People can buy cryptocurrencies directly from one another without the need for an exchange that can get hacked or steal your money. Ethereum allows people to connect directly with each other without a central authority to take care of things. It's a network of computers that together combined into one powerful decentralized supercomputer.
Now or dao stands for decentralized, autonomous organization, which allowed users to deposit money and get returns based on the investments that the dowel made the decisions themselves would be crowdsourced and decentralized, the Dow raised $150 million in Ethereum currency, ether, when ether was trading at around $20. While this all sounded very good, the code wasn't secured very well and resulted in someone figuring out a way to drain the Dow out of money. Now, you could say that the person who drained it down was a hacker, but somewhat argue that this was just someone who was taking advantage of the loopholes, he found in the Dow's smart contract, and this isn't very different than a creative lawyer figuring out a loophole in the current law to effect a positive result for his client. What happened next is that the Etherium community decided that code, no longer is law, and change the Ethereum rules in order to revert all the money that went into the Dow. In other words, the contract writers and investors did something stupid, and the Ethereum developers decided to bail them out. The small minority that didn't agree with this move stuck to the original Ethereum blockchain before its protocol was altered. And that's how Ethereum classic was born, which is actually the original Ethereum.
We've covered a lot, up until now. And the last thing I want to talk about is Ethereum as a currency. We've already established that Aetherium is basically a large bunch of computers working together like one supercomputer to execute code that powers depths. However, this costs money, money to get the machines to power them up, store them and cool them if needed. That's why ether was invented when people talk about the price of Aetherium, they actually are referring to, ether, the currency that incentivizes people to run the Etherium protocol on their computer. This is very similar to the way Bitcoin miners get paid for maintaining the Bitcoin Blockchain. In order to deploy a smart contract to the Ethereum platform. Its author must pay to do so, that payment is made in the form of ether. This is done so that people will write optimized and efficient code and won't waste the Ethereum network computing power on unnecessary tasks. Ether was first distributed in Ethereum's original initial coin offering back in 2014 Back then, it cost around 40 cents to buy one ether. Today, one ether is valued in the hundreds of dollars since the use of the Ethereum network has grown immensely due to the ICO hype that started in 2017.
Ethereum is network and ether, or a whole new rabbit hole that will cover, but I think this will do for now as an intro to an Ethereum.