How Does The Ethereum Foundation Make Money – What in the world is Ethereum I indicate I keep hearing about it all the time I’ve seen it’s the second largest cryptocurrency around, but I simply can’t seem to cover my head around it.
Is it as innovative as Bitcoin? Can it actually change the world as we know it If you want to have a much better understanding of Ethereum, but are tired of explanations that sound like total technical gibberish, remain … Here on Bitcoin, Whiteboard Tuesday, or should I state, Ethereum, Whiteboard Tuesday, we’ll answer these questions And more.
Before we enter Ethereum, we need to do a quick recap about Bitcoin since it’s the basis from which Ethereum was born.
By now you probably know that Bitcoin is a kind of decentralized cash, and if you still have some questions about what that means or how it works, then you may consider revisiting our original video “what is Bitcoin”.
Prior to Bitcoin was created.
The only method to utilize cash digitally was through an intermediary like a bank or Paypal.
Even then, the money utilized was still a federal government issued and controlled currency.
Bitcoin changed all that by producing a decentralized form of currency that people could trade directly without the need for an intermediary.
Each Bitcoin transaction is verified and verified by the whole Bitcoin network.
There’s, no single point of failure, so the system is virtually difficult to shut down, manage or manipulate.
Pretty cool huh Well now that we know that cash can be decentralized.
What other functions of society that are centralized today would be better served on a decentralized system.
What about voting Voting requires a main authority to count and confirm votes.
Real estate transfer records presently utilize central residential or commercial property registration.
Social media network like Facebook are based upon centralized servers that control all of the information we upload to them.
What if we might use the technology behind Bitcoin, more commonly known as Blockchain to decentralize other things as well.
The fascinating aspect of Blockchain innovation is that it’s, actually, the spin-off of the Bitcoin invention.
Blockchain technology was developed by fusing already existing technologies like cryptography proof of work and decentralized network architecture together in order to create a system that can reach choices without a central authority.
There was no such thing as “blockchain innovation” prior to Bitcoin was invented.
Once Bitcoin became a truth, individuals started seeing how and why it works, and named this “thing” blockchain technology.
Blockchain is to Bitcoin what the Internet is to email, a system on top of which you Can develop programs and applications.
A currency like Bitcoin is simply one of the alternatives.
So this got people very thrilled and they began to check out.
What else can we decentralize.
Nevertheless, in order for a system to be really decentralized? It needs a big network of computer systems to run it.
Then, the only network that existed was Bitcoin and it was quite limited.
Bitcoin is composed in what is referred to as a “turing insufficient” language, that makes it understand just a small set of orders like who sent out just how much money to whom.
If you want to produce a more complicated system, you’ll require a various programs language, which means a various network of computers.
Picture for a 2nd.
You wished to develop your own decentralized program, just like Bitcoin in the house.
You ‘D need to comprehend how Bitcoin’s decentralization works.
Compose code that imitates the same behaviour, get a big network of computers to run this code and so on … And that is a lot of work.
Ethereum was first proposed in late 2013 and then brought to life in 2014 by Vitalik Buterin, who at the time was the co-founder of Bitcoin Magazine.
Ethereum is the Do It Yourself platform for decentralized programs, also known as Dapps decentralized apps.
If you wish to create a decentralized program that no single person controls, not even you, although you wrote it all you have to do, is learn the Ethereum programs language called Solidity and begin coding.
The Ethereum platform has thousands of independent computer systems running it, implying it’s fully decentralized.
Once a program is deployed to the Ethereum network, these computers, likewise called nodes, will make certain it executes as composed.
Ethereum is the facilities for running Dapps worldwide.
It’s, not a currency, it’s, a platform.
, The currency utilized to incentivize the network is called Ether, however more On that, later on.
Ethereum’s objective is to truly decentralize the Internet.
The internet is centralized.
I thought the Internet currently was decentralized which anybody can begin their own site.
, While in theory that may be true in practice: Amazon, Google, Facebook, Netflix and other giants manage.
The majority of the web, as we know, it.
There’s, almost no activity on the web, that takes place without some sort of intermediary or 3rd party.
, But once the principle of digital decentralization was demonstrated by Bitcoin a whole brand-new variety of opportunities became available.
We can finally begin to imagine and create an Internet that links users directly without the need for a central 3rd party.
People can “rent” disk drive space straight to other individuals and make Dropbox obsolete.
Chauffeurs can offer their services directly to passengers and get rid of “Uber” as the Middleman.
Individuals can purchase cryptocurrencies straight from one another without the need for an exchange that can get hacked or steal.
Your money. How Does The Ethereum Foundation Make Money
Ethereum permits individuals to connect straight with each other without a main authority to take care of things.
It’s, a network of computers that together integrate into one effective, decentralized, supercomputer.
Ok, So now you know what Ethereum does, however we haven’t discussed HOW it does it.
Ethereum’s coding, language Solidity is utilized to compose “Smart Contracts”.
That are the reasoning that runs Dapps.
Let me describe:.
In reality, all an agreement is is a sets of “Ifs” and “Thens”.
Suggesting a set of conditions and actions.
For instance, if I pay my property manager $ 1500 on the 1st of the month, then he lets me utilize my apartment or condo.
That’s precisely how smart agreements deal with Ethereum.
Ethereum designers write the conditions for their program or Dapp, and then the ethereum network performs it.
They are called smart agreements because they deal with all of the aspects of the contract enforcement efficiency, management and payment.
For example, if I have a smart contract that is used for paying lease, the property manager doesn’t require to actively gather the money.
The agreement itself, “understands”.
, if the money has been sent.
If I undoubtedly sent the cash, then I will be able to open my apartment door.
If I missed my payment, I will be locked out.
Smart agreements likewise have their disadvantages.
Going back to my previous example.
Instead of having to kick out a renter that isn’t paying a “wise” contract would lock the non-paying occupant out of their apartment or condo.
A genuinely intelligent agreement, on the other hand, would take into account other elements as well, such as extenuating circumstances, the spirit with which the agreement was written, and it would also be able to make exceptions if called for.
In other words, it would imitate a really good judge.
Instead, a “wise agreement” in the context of Ethereum is not smart at all.
It’s, really uncompromisingly letter stringent.
It follows the rules down to a T and can’t take any secondary factors to consider or the “spirit” of the law into account like what frequently occurs with real life contracts.
When a clever contract is deployed on the Ethereum network, it can not be modified or remedied even by its initial.
The only method to alter this agreement would be to persuade the whole Ethereum network that a modification need to be made and that’s virtually impossible.
This develops an extremely serious problem given that, unlike Bitcoin Ethereum was developed with the capability to develop really intricate agreements and complicated contracts are extremely challenging to protect.
With any contract the more complicated it is, the more difficult it is to enforce as more room is left for analyses Or more provisions must be composed to handle contingencies.
With wise agreements.
Security suggests handling with perfect precision every possible method which a contract could be performed in order to make certain that the agreement does just what the author planned.
Ethereum introduced with the idea that “code is law”.
That is a contract on Ethereum, is the supreme authority And nobody might overrule the agreement.
Well that all came to a crashing stop when the DAO occasion, occurred.
“Dow” or DAO, means “Decentralized Autonomous Organization”, which allowed users to transfer cash and get returns based on the investments that the DAO made.
The choices themselves would be.
Crowd-Sourced and decentralized.
The DAO raised $ 150M in Ethereum currency ether, when ether was trading around $ 20.
While this all sounded excellent, the code wasn’t protected effectively and led to someone finding out a way to drain the DAO out of cash.
Now you might say that the person who drained pipes the DAO was a “hacker”.
Some would argue that this was just someone who was taking benefit of the loopholes he found in the DAO’s clever agreement.
This isn’t really various than a creative legal representative, finding out a loophole in the existing law to effect a favorable result for his client.
What took place next is that the Ethereum community decided that code no longer is law and changed the Ethereum rules in order to go back all the cash that went into the DAO.
In other words, the contract, authors and financiers did something dumb and the Ethereum designers decided to bail them out.
The small minority that didn’t agree with this move adhered to the initial Ethereum Blockchain before its protocol was altered and that’s how Ethereum Classic was born, which is Actually, the initial Ethereum.
We’ve covered a lot up until now, and the last thing I wish to speak about is Ethereum as a currency.
We’ve currently developed, that Ethereum is basically a large lot of computer systems collaborating like one incredibly computer, to perform code that powers Dapps.
However, this costs cash Money to get the machines to power them up, save them and cool them.
That’s why Ether was created.
They in fact are referring to Ether the currency that incentivizes people to run the Ethereum protocol when people talk about the price of Ethereum.
On their computer system.
This is extremely similar to the method Bitcoin miners make money for keeping the Bitcoin blockchain.
In order to release a wise contract to the Ethereum platform, its author must pay to do so.
That payment is made in the type of ether.
This is done so that people will write optimized and effective code and won’t squander.
The Ethereum network calculating power on unnecessary tasks.
Ether was first distributed in Ethereum’s original Initial Coin, Offering back in 2014.
At that time it cost around 40 cents to buy one Ether.
Today, one Ether is valued in hundreds of dollars, considering that the use of the Ethereum network has grown exceptionally due to the ICO hype that started in 2017.
Still Confused Don’t fret, we’ll get more into Ether and mining in a later.
Ethereum’s network and Ether are an entire new bunny hole that we’ll cover, but I think this will do for now as an intro to Ethereum.
This concludes this week’s episode of Ethereum Whiteboard Tuesday.
Hopefully, by now you have a better understanding of what Ethereum is A network of computer systems collaborating to change the central design of programs and business which run the Internet today. How Does The Ethereum Foundation Make Money