You don’t have to spend long with cryptocurrency before you come across the term Ethereum. In a series of articles, we take a closer look at what Ethereum is, why it has become so popular, and what its added value is. It helps if you are already familiar with cryptocurrency, but we try to keep it as accessible as possible.
In early 2013, Ethereum was founded by Vitalik Buterin. The Ether (with the symbol ETH) is the currency in the platform. Since May 2016, the price of Ether rose from approximately 8 euros to more than 1000 euros (!) at its peak.
Ethereum was not only created as a new payment method. On the contrary. It is intended as a platform to run programs on. You normally read that as a “platform that enables developers to build and deploy decentralized blockchain applications”.
Until relatively recently, building such a program was complex and demanding. With the arrival of Ethereum, that has become a lot more accessible. Think of programs such as online elections, copyright registration, a protocol for supply chains, or tracking financial transactions. Ethereum makes it possible to let these types of applications use the blockchain, by providing developers with a platform, tools and information.
Another term you may have heard of. You could think of a Smart Contract as a smart account. If you transfer money to it, then it is not in that account afterwards, but then something happens. A program gets to work with the money transferred.
That program can do all kinds of clever things with it. Distribute among other accounts. Hold for a while and then forward. You can program anything you can think of.
It is an app on the Ethereum platform. And so it uses the Ethereum blockchain. The advantage of this is, among other things, that it makes censorship and fraud almost impossible.
Although other blockchains (besides Ethereum) also have the ability to perform tasks, this is usually very limited compared to Ethereum. Ethereum allows developers to create whatever they can come up with. And that is precisely the reason that thousands of applications have now been devised and made.
Programs that use a blockchain such as that of Ethereum are called Dapps. Dapp stands for decentralized application – a decentralized application. It is a collection of one or more smart contracts, which together form a cohesive application.
In practice, this means that everything that such an application has done is publicly and decentrally stored on a blockchain. Typically, you will see that such a program is open source (the source code is publicly available), there are rewards for checking the program, and that a majority-decided protocol is used for that checking.
On State of the Dapps, some of the built Dapps are searchable. It is a curated list of applications built and using Ethereum. At the time of writing, it is 1227 projects. Examples of these types of applications include a cloud operating system. A marketplace for digital art. Or a donation game with a random beneficiary. As we wrote, what a developer can think of can be built!
Ethereum is popular
The price of Ethereum has soared in a short period of time, thanks in part to the way it supports other companies to realize their plans. We haven’t talked about the most special Ethereum smart contract yet: the Ethereum token. We’ll get into that next time.