Ethereum is a blockchain-based software platform that is primarily used to support the world’s second largest cryptocurrency by market capitalization after Bitcoin. Like other cryptocurrencies, Ethereum can be used to send and receive value worldwide and without third parties watching or entering unexpectedly.
Value exchange is the main use case of the Ethereum blockchain today, often by the indigenous character of the blockchain, ether. But many of the developers are working on the cryptocurrency because of its long-term potential and the ambitious vision of its developers to use Ethereum to give users more control over their finances and online data. The ambitious idea – which sometimes leads to Ethereum being referred to as a “world computer” – was met with its share of critics who say it probably won’t work. But if this experiment runs as planned, it will generate programs very different from Facebook and Google, which users curiously or unknowingly trust with their data.
Ethereum enthusiasts aim to hand over control to users with the help of a blockchain, a technology that decentralizes data so that thousands of people around the world receive a copy. Developers can use Ethereum to build free applications, which means that a user’s data cannot be mishandled by the creators of the service.
Ethereum was first proposed in 2013 by developer Vitalik Buterin, who was 19 at the time, and was one of the pioneers of the idea of expanding the technology behind Bitcoin, a blockchain, to more use cases than transactions.
While Bitcoin was created with the goal of disrupting online banking and day-to-day transactions, Ethereum’s creators aim to use the same technology to replace online third-parties – those that store data, transfer mortgages, and store complex financial instruments. These apps help people in countless ways, such as paving the way for sharing holiday photos with friends on social media. But they were accused of abusing this control censoring data or accidentally spilling sensitive user data in hacks, to name a few examples.
The platform officially launched in 2015, turning the idea of Ethereum into a real, working network.
Ethereum and decentralized internet
Before you can understand Ethereum, it helps to understand managers first.
Today managers are everywhere. Behind the scenes, they help us perform all sorts of digital tasks. Gmail, for example, helps us send emails. Venmo helps us send $ 10 to a friend.
This means that our personal data, financial information, and so on are all mostly stored on other people’s computers – on clouds and servers owned by companies such as Facebook, Google or PayPal. Even this CoinDesk article is stored on a third party controlled server.
This structure can be problematic, according to proponents of decentralization. It means less direct control for users, and it also opens up opportunities for censorship where the manager can intervene and prevent a user from any action, whether to buy a certain share or post a certain message on social media, or block them altogether.
The idea of Ethereum is to change the way applications work on the Internet today, giving users more control by replacing managers with smart contracts which enforce rules automatically.
Many, including the inventors of the Internet, believe that the Internet has always been intended to be decentralized, and that split motion arose using new tools to help achieve this goal. Ethereum is one of the technologies to join this movement.
Questions about Ethereum
How is Ethereum different from Bitcoin?
Ethereum inspires Bitcoin. They are both cryptocurrencies. Ethereum uses the same technology behind Bitcoin, a blockchain, which uses a common, decentralized public ledger to decentralize the network so that it is not under the control of a single entity.
But while Bitcoin is used primarily as a store of value, the idea behind Ethereum is to decentralize other types of applications and services, from social media networks to more complex financial deals.
Why is Ethereum sometimes called a ‘world computer?’
Many proponents see Ethereum as a “global computer” that could decentralize the Internet.
With Ethereum, centralized servers are being replaced by thousands of so-called “nodes” managed by volunteers around the world, thus forming a “world computer”. The hope is that someday anyone in the world will be able to use it.
How does the Ethereum app work?
Scrolling through a typical app store, you’ll see a variety of colorful squares that represent everything from banking to fitness to message apps. The long-term vision of the Ethereum community is to make apps that look exactly like these, but that work differently under the hood.
In short, the goal is for Ethereum applications to return control of the data in these types of services to its owner.
What are the next steps for Ethereum?
It is worth noting that Ethereum was met with healthy skeptical. First, Ethereum is far from scalable, meaning it can’t support many users right now, throwing a key into the idea of a “global computer” that disrupts Google, Facebook and other centralized platforms.
Ethereum 2.0, which was launched on December 1, 2020, aims to fix some of these problems. Other scale technologies, such as Raiden – who has been in the works for years – could also help with the scalable problem.