What is Ethereum – Beginner’s guide

By Btcbeginners.com | btcbeginners | 23 Sep 2019


You may hear bitcoin which is disrupting the traditional financial industry where we transact each other. After this huge innovation, New revolutionary Ethereum cryptocurrency born in 2015 which simply smart contract platform. In this guide perfectly suitable for beginners and cryptocurrency enthusiasts where explanation comes with short and simple manner. Some of the topics are going to cover Whats is Ethereum, Technology behind the Ethereum, Ethereum’s applications, how to earn money using Ethereum and complete guide to buying Ethereum worldwide.

What is Ethereum?

Ethereum is open-source, distributed blockchain-based smart contract programming environment where developers can build decentralized applications top of the Ethereum blockchain. Ethereum is digital currency behalf of smart contract facility where the currency is Ether. Ethereum was founded by Vitalic Buterin who is a programmer and former contributor of the BitcoinMagazine.

History-Special milestones

There are a lot of updates and Events happened in Ethereums history, These are the major events and updates,

  • In February 2014, Ethereum foundation was born.
  • In May 2015, Testnet launched [Olympic]
  • In 30th July 2015, Mainnet launched [Frontier ] and Genesis block was created where the genesis block means first created a block of any blockchain.
  • In April 2016, DAO [Decentralized Autonomous Organization] launched and 150M raised where the DAO is a smart contract that describes the organization.
  • In June 2016, Bug in DAO code exposed and hacked by unknown. To refund 50M immediately decided to hard-fork the Ethereum blockchain [Hardfork is splitting the old blockchain and eventually creating new blockchain by Majority miners voting]. Someone stayed the old Ethereum chain which is called Ethereum classic.
  • In January 2018, Ethereum hit all the time high which was 1390$
  • Next Major Update has to come which Serenity

What is Ethereum smart contract?

Normal contracts are agreements of the two parties or more which written on paper and enforced by law. A smart contract is self-executed computer coding technique intends to digitally facilitate, verify, or enforce the traditional contracts.  First Nick Zhabo introduce the smart contract concept and, later Vitalic Buterin integrates into the Ethereum blockchain.

Advantages of smart contract

  1. No intermediaries – Normally traditional contracts rely on third parties likes lawyer and smart contract depends on the blockchain
  2. Speed – Typically more speed than traditional contracts because it is run by written codes. No paper works
  3. Transparency – Contracts open to the relevant parties and There are no doubts.
  4. Storage and Backup – All the copies of the contracts spread over the computer nodes and every transaction records on the blockchain.

Smart contract applications run on Ethereum blockchain help of computing power is provided by Ehtereum nodes spread all over the world. Nodes can introduce as decentralized world computer where contract transactions distributed publicly across these nodes and recorded in Ethereums blockchain. These nodes get paid from the native currency Ether(Eth) for computing power provided.

Ethereum typical terms

There are many terms used in the Ethereum platform where explain popular terms.

What is Ether, gas price, and gas limit?

Ether(Eth) is the native currency in Ethereum blockchain where Ether valued unit ( digital asset) used to pay out for computer power provided to the network.

Gas: When the transaction happens in Ethereum blockchain, Computer hash power need to process a transaction where the hash power required, is determined by the gas unit.

Gas Price: the Gas price is amount pay (amount of Eth ) per unit of gas for a particular transaction where high gas price faster transactions. ( Fee for transaction = Gas price * Gas limit) Gas limit: Maximum amount willing to pay for a particular transaction fee.

ERC -20 token: That is created in Ethereum blockchain when developing a new Dapp project or when you need to raise capital for new cryptocurrency project. These tokens create, issues according to a set of standards provided by Ethereum. This token also traded in cryptocurrency exchanges.

Whats Wei and Gwei?

Wei and Gwei also, a sub-unit of Ether which is used to indicate transactions fees because that is very small.

( 1Wei = 10^ -18 Eth )

( 1Gwei = 10^ -9 Eth )

 

Ethereum decentralized applications (Dapps)

Decentralized application[ Dapps] is an application that is run and build on Ethereum blockchain. When creating Dapp, we can create token to represent the Dapp brand, a token can be used to fundraise for project, used for the platform as a utility token. The Dapp tokens traded on exchanges and we can invest in Dapp projects that have the potential to grow in the future.

As an example, BAT token price in ICO stage was $0.035 and June 2019 price is near 0.25$. In case total gain is 7X within few years.

A typical process to build decentralized applications

  1. If you have an innovative idea write a white paper
  2. Establishing the startup
  3. Marketing the project to attract investors, Most startups hold bounty program to promote the project among the crypto community
  4. Hold ICO to raised fund for development and other expenditure
  5. Development and Launch

There are so many applications built on Ethereum blockchain almost over 1000 exists but most of the projects not performing well on the market right now. Most popular apps are listed category wise here for knowledge.

01.Necessary app to interact with Ethereum blockchain

Metamask: Metamask is Ethereum wallet application that is used to store, receive, send Ethereum. Which is build as a chrome extension and completely free. A good feature is you can create multiple Ethereum accounts on one extension with one key phrase and password. Metamask supports so many Dapps such as decentralized exchanges, MakerDao CDP, etc.

Myetherwallet: MyEtherWallet is one of the most popular wallet interfaces to interact with Ethereum’s blockchain secure way. MEW supports hardware wallet and so many Dapps such as MakerDao CDP. The MEWconnect app is available for Android and iOS. They support instant token swap( Token exchange ) with Kyber network, and Changelly, Simplex for fiat currency exchanges.

Mycrypto: Mycrypto is fast-growing Ethereum desktop wallet which is a good alternative to MEW. They also, provide buy and sell service partnering with Shapeshift exchanges and 0x instant.

Brave: Brave is a cryptocurrency web browser like Google Chrome. Brave native currency is BAT token which is ERC-20 token and Its supports the ERC 20 tokens.

Status: Status is a messenger, crypto wallet, and Web3 browser

Selfkey: SelfKey is self-sovereign identity management system for more freedom and privacy

02. Defi apps[ Decentralized Finance]

Ehtlend: This is a lending platform where taking loans with low interest collateralizing supported cryptocurrency. Loans offer for stable coins and fiat currencies.

MakerDAO CDP: CDP enables generate DAI stable coin for depositing and Lockup Ethereum as collateral future it supports many collateral assets. You can get back collateral making full payment of generated DAI where some fee will be charged using MKR.

BlockFi: Blockfi provides cryptocurrency loan service and earns interest from the deposing cryptocurrency.

Dharma: Dharma provides Lend, Borrow services.

Uniswap: Uniswap is cryptocurrency trading platform which provides instant buy and sells Eth and ERC-20 tokens.

03. Decentralized games

Nowadays, a lot of game developers are looking to decentralized game development and it is a new way to interact with developers and players each other. Let’s look at powerful games exist in the current market.

Cryptokitties: Cryptokitty is decentralized blockchain game which is consist of 100% owning breedable, collectible creatures. These collectibles cannot be replicated, taken away, or destroyed. 

0x universe: 0xUniverse is the next generation blockchain game where players can build spaceships, explore the galaxy, and colonize planets.

Megacryptopolis: Megacryptopolis consists of building the decentralized city on Ethereum blockchain.

God unchanged: God unchanged is a battle game which is transparent and immutable all transactions.

Axie infinity: Axie Infinity is a kind of digital pet community which lets you battle, collect and raise adorable creatures called Axies.

04. Decentralized exchanges

Idex: Idex is most popular ethereum decentralized exchange exists which is listed more than 400 ERC 20 tokens. The exchange has native token called Idex, formerly  Aura token.

Forkdelta: Forkdelta also, a decentralized exchange which is listed 15 verified tokens listing and lot of unverified tokens.

Bancor: Bancor is decentralized liquidity network that provides wallet service store, exchange for any other tokens automatically, send and receive. Bancor has own token call BNT.

Kyber Network: Kyber is an on-chain liquidity protocol that aggregates liquidity from a wide range of reserves, powering instant and secure token exchange in any decentralized application.

05. Market Places/Platforms

Aragon: Aragon consists freely creating decentralized organizations such as companies, communities without border or intermediaries

Augar: Augar is decentralized prediction market for real-world events

Distri0x: Distric0x is a network of decentralized markets and communities to create, operate and govern.

Decentraland: Decentraland is virtual world owning the users where users can build, explore and even earn cryptocurrency from the user’s creations.

06. Decentralized freelance platforms

Ethlance: An Ethlance is Decentralized Upwork for both Hire and work, both parties payments using Ether and Not fees charge for work or hire. In traditional market places, They are cut  10%  – 20%  from the freelancer’s earnings.

Bounties Network: This is a decentralized freelance market place, where any freelancer can contribute for a listed task by task owners where payments though Eth for both parties.

07. Decentralized gambling/betting

FCK: FCK is decentralized game or betting system which offer dice rolling, poker, roulette, lottery, etc.

Dice 2 win: Dice.2.win also, a decentralized betting system which offers coin flip, dice rolling, etc.

Edgeless: Edgeless is ethereum powered casino platform which offers dice rolling, treasure hunt, roulette, slots, blackjack, etc.

Etherol: Etheroll is an Ethereum smart contract for placing bets on our provably-fair dice game using Ether

 

What is Ethereum 2.0

Eth 2.0 update will huge for ethereum blockchain because It will solve a lot of issues arising in current ethereum blockchain then Ethereum will be faster, efficient and economical. Also, this major update called “Serenity” update.

Eth 2.0 major updates

01. Proof of stake – Casper

Next major update is converting proof of work( Ethereum used bitcoin transaction validation mechanism-miners ) to proof of stake(validator nodes locking up ethereum- stakers) where Staking users will earn the interest with Eth. Staking is more economical than mining.

02. Sharding

This is major integration into the Ethereum blockchain which is partitioning large chains into smaller parts which bring faster and efficient transaction. Eventually, the network becomes more scalable.

03.EWASM- Ethereum virtual machine improvements

EVM is a kind of code running environment in Ethereum where all nodes connected. EWASM will increase code execution speeds and time.

04.Plasma

Which is an extra layer or chain to handle a huge amount of transaction? It is Etherem’s lightning network. (Lightning network is a second-layer solution for bitcoin for scalability solutions)

 

How to invest in Ethereum

There are few methods to invest in Ethereum platform which are listed and explained.

01.Ethereum mining

Ethereum uses bitcoin mining concept to Validate Ethereum’s transactions. In this case, miners should provide computer hash power (GPU mostly used) to the Ehterum network. We can earn money for contributing hash power to Ethereum network. Cheap electricity is the main factor for profitable mining.

02.Hodl

Most investors and retails buyers buy Ethereum at a lower price and then sell it at a higher price which is the most popular and easy way to invest in Ethereum.

03. Ethereum trading

As traditional assets, Ehtereum also, traded in so many exchanges. To get start cryptocurrency trading, you need to learn TA, FA  and Basic trading technique to get constant profit.(TA- Technical analysis, FA – Fundamental analysis)

 

Conclusion

In this article explain everything of Ethereum (world computer) such as, What is ethereum, Smart contracts, Ethereum major milestones and updates, Next major update Ethereum 2.0 which is called serenity, decentralized apps category wised, Ethereum investing and how to buy Ethereum, etc in a simple and understandable way.

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