Explaining Ethereum

Ethereum: What is it?

Is it just another cryptocurrrency that managed to make it to the top?

Or it it actually just a bunch of smart contracts, more suitable for companies to buy and sell with each other?

First, let's look at a "smart contract".

function ERC20Token(
) {
balances[msg.sender] = 690000069; 
totalSupply = 690000069;
name = "SimpleCoin"; 
decimals = 0; 
symbol = "SIC"; 

function approveAndCall(address _spender, uint256 _value, bytes _extraData) returns (bool success) {
allowed[msg.sender][_spender] = _value;
Approval(msg.sender, _spender, _value);

if(!"receiveApproval(address,uint256,address,bytes)"))), msg.sender, _value, this, _extraData)) { throw; }
return true;


This contract is supposed to be deployed to a testnet or the mainnet as part of the creation of a ERC20 token. It gives the creator 690000069 tokens out of a total circulating supply of 690000069 tokens and is called "SimpleCoin". 

So what is it good for?

Imagine you are a company selling cupcakes. One day, you decide to sell cupcakes online. To accept payment, you decide to accept Bitcoin. One day, a customer decides to buy 1000 cupcakes to sell at a bake sale.

So you send him the cupcakes, and he promises to send you the Bitcoin next week.

He doesn't.

Next week, he closes down his website and telephone number. Congratulations. You have fallen to a scam.

A smart contract solves that. It is basically a if-then-else sequence that, for example, will send Ethereum from an address to another address if cupcakes are received.

Therefore, it can solve disputes by only paying when certain conditions are met, just like contracts in real life.

But is this important?

Yes. In normal trading, writing smart contracts can make sure that you receive your products after paying. However, this means that transaction fees can be quite high, with even transactions of 0 ETH costing 2 dollars.



Thanks for reading.


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Explaining Cryptocurrencies
Explaining Cryptocurrencies

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