What Is Ethereum?
A Beginners Guide To Ethereum
The Ethereum blockchain is a scripting language platform for general purpose applications; Its network connects a gallery of decentralized applications, many of which serve as disruptive business models attempting to revolutionize industries from banking to Real Estate, forcing them to adapt and take on innovative ways to improve their business.
The spread of its global outreach has been seen in every social class and demographic, and is shaking the core of even the most established global industries, specifically large corporations, and banks.
In late July 2015, 21-year-old Vitalik Buterin deployed the Ethereum virtual machine to the public and developers began writing smart contracts and decentralized apps. In addition to Buterin, other co-founders include Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson. It is notable to add that Buterin also has mentioned that he was working with developer Dr. Gavin Wood and Joseph Lubin.
The team formally began development of the Ethereum software project in early 2014 under the business name, Ethereum Switzerland GmbH (EthSuisse). The official four co-founders raised investments through an Initial Coin Offering.
What is a Smart Contract?
The idea of smart contracts was conceived in 1994 by acclaimed legal scholar and cryptographer, Nick Szabo who proposed the idea of self-executing agreements with the terms of the agreement written into the code.
Smart contracts are self-executing contracts that bind two or more parties to a trackable and irreversible agreement. Smart contracts allow the automatic execution of pre-programmed payments or events that two or more parties have committed to under an agreement.
They are designed to get rid of middlemen, improve efficiency and reduce costs to users. A smart contract can be built to help a user do anything from sending money, renting a car, buying stocks or even selling a house, all without the help of agents and middlemen. The transparency, immutability, and cryptographic security of blockchains make for the ideal place to store such contracts.
One of the key elements of a smart contract is that it can enforce conditions without the need for a third party, the contract is constructed so that once certain conditions are met, elements are unlocked. These conditions could be anything from a payment arriving, to the temperature outside hitting a certain threshold.
Common use cases include assurance contracts like Crowd Funding, auctions apps, and economic games which award players for reaching specific milestones or discovering something within the game.
The Advantages Of Smart Contracts
The key benefits of smart contracts are transparency, efficiency, and autonomy. There’s no requirement for the middleman, the lawyer, stockbroker or property agent. The execution of the contract is visible by all parties and is automatic, unbiased and fair.
Transactions times can drop dramatically when employing a smart contract. When selling your house you no longer have to wait for two sets of lawyers to check the documents, both vendor and purchaser can automate the process saving time and cost.
Smart contracts also put an end to lost information. The blockchain stores all transactions in its history, so your property deeds, share certificates or receipts can never be lost.
What Industries Could Smart Contracts Be Used In?
The use cases of smart contracts are evolving rapidly, but here are just a few examples of how they could be employed in different industries:
Stocks: Your stockbroker takes a fee every time you buy or sell. With a smart contract, the whole market can be built so that these middlemen aren’t needed at all and buyers are matched with sellers at the current market price, automatically and transparently.
Property: If you’re selling your house, there’s no need for a lawyer. Standardised smart contracts will become available so that you are the one making the agreement with your buyer. The whole process is quick, low-cost and transparent.
Logistics: International trade is big business. Currently, most of the process is manual and paper-based. Goods sit in customs for long periods awaiting authorisation. Smart contracts can help improve supply chain visibility, prove ownership quickly, and reduce bureaucracy and associated cost.
Money Transfer: For millions of foreign workers, every time they want to send money back to their families they have to pay a large commission to a money transfer company. A smart contract can easily take a portion of their wage each month and instantly transfer it cross-border to their family, for zero cost.
Social Support: Many governments run schemes offering discounted energy rates for vulnerable citizens, such as the warm home discount scheme. A smart contract could register that the temperature has not exceeded a specified value for a fixed number of days and then execute transactions into the bank accounts of all citizens that met the criteria of the contract, all automatically and without any human input.
What Is Ether?
As well as a tradable cryptocurrency, Ether (Eth) is the token used to fuel the Ethereum network, powering smart contracts, DApps, and transactions on the Ethereum blockchain. It is also the incentive paid to miners for securing the Ethereum blockchain.
Unlike Bitcoin, which has a capped supply of 21 million, Ethereum has no fixed supply limit, though is capped at 18 million ether a year.