What is Ethereum?
What is Ethereum?
Today, all of our information that we use on the internet like passwords and personal information, is all stored on large servers or clouds owned by large corporations like Facebook, Amazon, and Chase. Even this article is stored on a 'centralized' server controlled by a company that charges to store the data.
Although it's usually safe to store your data on these servers, they can be compromised. A hacker or Government can gain access to your personal data without your knowledge. This is done by influencing or hacking a third-party service - meaning they can steal, leak, or change data as they please.
Ethereum is a new virtual machine that is built on a Blockchain. A Blockchain is a new technology that is 'decentralized' and allows for information to be stored on a globally connected network, rather than a central location.
Introduced with the first cryptocurrency, Bitcoin in 2009. A blockchain is a public ledger or database that holds every transaction ever executed along a 'chain' that is followed in chronological order by 'blocks' or bundles of transactions.
While Bitcoin aims to disrupt PayPal and online banking, Ethereum has the goal of using a blockchain to replace internet third parties — those that store data, transfer mortgages and keep track of complex financial instruments. The possibilities of applications that can be built on top of Ethereum are endless.
The 'Global Computer'
On the Ethereum Network, servers and clouds are replaced by nodes or interconnected computers, that are ran by volunteers all around the world (thus forming a 'global computer').
Each and every one of these nodes store and validate all of the transactions and info that are processed on the network. This is the basis for the underlying blockchain technology, which you can read about in detail here.
Ethereum was created with the intent that people can build programs we may use every day, with no middle man, and no central server to house that private data. Without a central server, there is no main authority to change or shut down these programs without the entire community knowing.
In theory, it combines the control that people had over their information in the past with the easy-to-access information that we’re used to today. Each time you save edits, or add or delete notes, every node on the network makes the change.
While Bitcoin, the first and most dominant cryptocurrency has a hard cap of 21 million bitcoins, ether does not have a similar limit. Of the ether that does exist, 60 million was purchased by users in a 2014 crowdfunding campaign. Another 12 million ether went to the Ethereum Foundation, a group of researchers and developers working on the underlying blockchain technology. 21 year old Vitalik Buterin, a Canadian-Russian programmer is the creator of network and leads the Ethereum Foundation.
This was the largest crowdfund or Initial coin offering (ICO) ever. Ethereum creator, Vitalik Buterin proposed a white paper in 2014 and then sold ether tokens in exchange for funding to build the first Ethereum blockchain. ICO's are now gaining popularity because of their unregulated nature and tremendous upside. Ethereum allows users to do the same on their blockchain. Start-ups can build programs that use a coin for incentive on top of the Ethereum network. This drives the price of ether (ETH) as it is the fuel that powers the Ethereum Virtual Machine (EVM).