What is Ethereum? What are Smart Contracts & dApps?
Rolled-out in 2015 by the Russian-Canadian programmer Vitalik Buterin, Ethereum today is one of the largest P2P (peer-to-peer) network. It is a platform used by developers to create coded self-executing contracts between the buyers and sellers called ‘Smart Contracts’ that are not controlled by any entity. These are published and run on Ethereum’s own public blockchain, which is universally accessible and verifiable, hence ensuring protection from frauds or misuse by third parties.
To understand Ethereum, however, you first need to understand the centralization of the Internet. Personal and financial data, as well as passwords, are usually stored on server farms of large companies such as Facebook, Google or Amazon. We are all aware of the advantages of these services. However, this increasingly centralized nature of the Internet also has its downside. Our data is often controlled by a few large providers and is not always used for our common good.
I don’t get why Apple’s restrictive app store policies don’t get criticized more. One company (with market cap approaching $1 trillion) gets more de-facto filtering power over mobile internet users than many governments, heavily wields it, and so few tech people seem to complain.— Vitalik Buterin the Co-founder of Ethereum (@VitalikButerin) June 27, 2018
Brian Behlendorf, one of the developers of the Apache Web Server, even describes the centralization of the Internet on huge server farms as the original sin of the Internet. According to Behlendorf, the Internet was decentralized right from the start. With the help of various tools, such as the blockchain, this goal of decentralization can now be achieved again. This is where Ethereum comes in. While Bitcoin is shaking up our financial system, Ethereum is using blockchain technology to make middlemen redundant on the Internet. With Ethereum, both data hosting and contract fulfillment are no longer to be centrally managed by a few Internet giants.
Ethereum wants to partially replace the current client-server model through a blockchain. A server or a cloud is replaced by thousands of “nodes”. A node can be a set up by anyone with Internet access and a computer and thus acts as one of many control instances. These nodes essentially maintain the payment network: they check and store each block in the blockchain and also check the individual transactions that are processed using Ethereum’s own digital currency Ether. However, the special feature of Ethereum is the Smart Contracts, which turns the Ethereum network into a decentralized computer. Smart Contracts are, as the name suggests, intelligent contracts or small programs that run on the Ethereum network and can, for example, regulate transaction conditions of Ethereum.
With the help of these Smart Contracts, the development of so-called dApps is possible. These decentralized applications, which can be continuously checked during their runtime, are intended to make programs as transparent as possible. With the help of these dApps, the vision behind Ethereum can be explained as following: since everyone can ultimately operate a node, everyone has the same functionality and can offer services based on the infrastructure and does not have to submit to a central instance. Developers of dApps would be able to freely offer them dApps independent of the app store provider, hence the preselection of an app store would be omitted.
Dapps have the potential to become self-sustaining because they empower their stakeholders to invest in the development of the Dapp. Because of that, it is conceivable that Dapps for payments, data storage, bandwidth and cloud computing may one day surpass the valuation of multinational corporations like Visa, Dropbox, Comcast, and Amazon that are currently active in the space. – David Johnston (Whitepaper)
We will use dApps in the future that will feel like ordinary apps. However, the crucial processes of those apps will be handled by Smart Contracts via a blockchain. Most will not recognize it, but slowly dApps become “consumer apps”. The Blockchain will be omnipresent, although not visible for everyone. The blockchain will change our lives, just as the Internet has changed our lives. But we can’t see what’s coming to us today. Just as only a few people at that time could imagine how much the Internet would change our world. And at some point in the future, we will look back and ask ourselves why we didn’t see all this back then. We will then have the same experience as watching the following video. We will ask ourselves how we could live without Blockchain.