August 19, 2018 / Types of Cryptocurrency

What is Ethereum

Ethereum is a blockchain that gives you the ability to run programs in its trusted environment. This mechanism contrasts with blockchain Bitcoin, as it allows you to only manage cryptocurrencies.

Ethereum has a virtual machine called Ethereum Virtual Machine (EVM). EVM makes it possible to check and execute code on the blockchain, while ensuring that it will work equally on each machine. This code is embedded in “smart contracts” (more on this below).

In addition to the simple tracking of account balances, the Ethereum maintains the state of EVM on the blockchain. In order to check the integrity of contracts and their conclusions, all sites handle smart contracts.

What is a smart contract?

A smart contract is a code that run on EVM. Smart contracts can receive and store ether, data or a their combination. Then, using the logic programmed in this contract, it can distribute ether to other accounts or even to other smart contracts.

Here is an example of a smart contract between Bob and Alice. Alice wants to employ Bob for construction a patio for herself. They decided to use the escrow agreement (a place to store money until the terms of the contract aren’t completely satisfied), to store their ether until the final payment.

  1. Alice agrees to keep her payment for the patio with the help of the escrow agreement, Bob also agrees to make an equivalent amount.

  2. When Bob completes the patio project, Alice will give permission in the smart contract to unlock the funds.
  3. Bob receives payment from Alice together with the pledge

(Provisions can be written to the contract code, which unlocks Bob’s pledge for Alice if Bob can not build a patio or if he badly performs his job)

Smart contracts are written on Solidity language. Solidity is statically compiled, among other things, supports inheritance, libraries, and complex custom types. Syntax Solidity is similar to JavaScript.

Ethereum Networks

Until now, we have described Ethereum main blockchain (or “MainNet”). In Mainnet, data about the block, including balances and transactions, is publicly available, and anyone can create a node and begin processing the transaction. The ether already has a market value, that exchanges for other cryptocurrencies or fiat currencies, such as U.S. dollars and others.

But there are other networks. In fact, everyone can create their own network.

Local testnet

Ethereum blockchain can be modeled locally for expansion. Local testnet instantly process transactions, Ether is distributed at wish. There is an array of Ethereum simulators; we recommend Ganache.

Public testnet

Developers use public testnet (or test networks) to test the Ethereum apps before final expansion in the core network. Ether is used only for testing in such networks, it has no cost.

There are three widely used public testnets:

Ropsten: The official test network created by Ethereum Foundation. Its functionality is similar to MainNet.

Kovan: A network where a consensus method called “proof of authority” is applied. This means that its transactions are checked by individual participants, which leads to a consistent four-second block time. The ether offers in this test network are also monitored in order to mitigate spam attacks.

Rinkeby: Testnet also uses the “proof of authority” created by The Ethereum Foundation.

Private/corporate networks

The private Ethereum networks allow the parties to exchange data without making them publicly available.

Private blockchain is a good choice for:

  1. exchange of confidential data, such as health records;
  2. scaling for greater capacity, due to the smaller network size.

An example of a private corporate blockchain is Quorum, originally written by J.P. Morgan.

Distributed applications (dapps)

Applications that use smart contracts to process them are called “distributed applications” or “dapps”. The user interfaces of these dapps are written in program languages such as HTML, CSS, and JavaScript. The application can run on a traditional web server or in a decentralized Swarm or IPFS file service.

Given the advantages of the Ethereum blockchain, dapp can solve many problems in such industries, including but not limited to:

  1. Record keeping
  2. Finance
  3. Supply chains
  4. Property
  5. Trading platforms

 The best way to create your own dapps is to test it and involve it to the Ethereum networks of your choice.

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