How Does Ethereum Avoid The Scaling Problem – What in the world is Ethereum I mean I keep becoming aware of it all the time I have actually seen it’s the second largest cryptocurrency around, however I simply can’t seem to cover my head around it.
Is it as innovative as Bitcoin? Can it really alter the world as we know it If you want to have a better understanding of Ethereum, but are tired of explanations that sound like total technical gibberish, stick around … Here on Bitcoin, Whiteboard Tuesday, or ought to I say, Ethereum, Whiteboard Tuesday, we’ll answer these concerns 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 type of decentralized cash, and if you still have some concerns about what that suggests or how it works, then you might consider revisiting our initial video “what is Bitcoin”.
Before Bitcoin was invented.
The only way to utilize cash digitally was through an intermediary like a bank or Paypal.
Even then, the cash used was still a government issued and regulated currency.
However, Bitcoin altered all that by producing a decentralized form of currency that individuals could trade directly without the requirement for an intermediary.
Each Bitcoin transaction is confirmed and validated by the entire Bitcoin network.
There’s, no single point of failure, so the system is virtually difficult to close down, control or control.
Pretty neat huh Well now that we understand that money 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 central authority to count and confirm votes.
Real estate transfer records presently utilize centralized residential or commercial property registration.
Social media network like Facebook are based on centralized servers that control all of the data we upload to them.
What if we might use the innovation behind Bitcoin, more typically known as Blockchain to decentralize other things.
The intriguing feature of Blockchain technology is that it’s, really, the by-product of the Bitcoin innovation.
Blockchain innovation was developed by merging currently existing technologies like cryptography proof of work and decentralized network architecture together in order to develop a system that can reach decisions without a main authority.
There was no such thing as “blockchain technology” before Bitcoin was created.
Once Bitcoin became a reality, 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 among the choices.
So this got people really excited and they began to check out.
What else can we decentralize.
In order for a system to be truly decentralized? It needs a large network of computer systems to run it.
The only network that existed was Bitcoin and it was pretty limited.
Bitcoin is composed in what is called a “turing incomplete” language, which makes it understand only a little set of orders like who sent how much money to whom.
If you want to develop a more complex system, you’ll need a different shows language, which indicates a different network of computers.
Picture for a 2nd.
You wished to build your own decentralized program, just like Bitcoin in the house.
You ‘D need to understand how Bitcoin’s decentralization works.
Compose code that imitates the same behaviour, get a substantial network of computers to run this code and so on … And that is a great deal of work.
Ethereum was very 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 called Dapps decentralized apps.
If you want to create a decentralized program that no single person controls, not even you, even though you wrote it all you have to do, is learn the Ethereum programming language called Solidity and begin coding.
The Ethereum platform has thousands of independent computer systems running it, suggesting it’s totally decentralized.
As soon as a program is released to the Ethereum network, these computer systems, likewise referred to as nodes, will make sure 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.
Ethereum’s goal is to really decentralize the Internet.
The web is centralized.
I believed the Internet currently was decentralized and that anybody can begin their own website.
, While in theory that may be real in practice: Amazon, Google, Facebook, Netflix and other giants manage.
The majority of the internet, as we understand, it.
There’s, nearly no activity on the internet, that takes place without some sort of intermediary or 3rd party.
, But once the concept of digital decentralization was demonstrated by Bitcoin an entire brand-new range of chances appeared.
We can lastly begin to envision and develop an Internet that connects users directly without the requirement for a central 3rd party.
People can “rent” hard disk space straight to other individuals and make Dropbox obsolete.
Chauffeurs can use their services directly to guests and get rid of “Uber” as the Middleman.
People can buy cryptocurrencies straight from one another without the requirement for an exchange that can get hacked or take.
Your money. How Does Ethereum Avoid The Scaling Problem
Ethereum enables individuals to link straight with each other without a main authority to take care of things.
It’s, a network of computers that together combine into one powerful, decentralized, supercomputer.
Ok, So now you understand what Ethereum does, but we haven’t discussed HOW it does it.
Ethereum’s coding, language Solidity is utilized to write “Smart Contracts”.
That are the reasoning that runs Dapps.
Let me explain:.
In reality, all a contract is is a sets of “Ifs” and “Thens”.
Implying a set of conditions and actions.
For example, if I pay my landlord $ 1500 on the 1st of the month, then he lets me use my apartment or condo.
That’s exactly how wise contracts work on Ethereum.
Ethereum designers write the conditions for their program or Dapp, and then the ethereum network performs it.
Because they deal with all of the elements of the agreement enforcement management, payment and performance, they are called clever agreements.
If I have a smart contract that is used for paying rent, the property owner does not need to actively collect the money.
The contract itself, “understands”.
If the cash has actually been sent.
If I undoubtedly sent out the money, then I will be able to open my apartment door.
If I missed my payment, I will be locked out.
Nevertheless, clever contracts also have their disadvantages.
Going back to my previous example.
Rather of having to toss out an occupant that isn’t paying a “smart” contract would lock the non-paying renter out of their home.
A really smart agreement, on the other hand, would consider other factors too, such as extenuating scenarios, the spirit with which the agreement was written, and it would likewise have the ability to make exceptions if necessitated.
In other words, it would act like a truly great judge.
Rather, a “smart contract” in the context of Ethereum is not smart at all.
It’s, in fact uncompromisingly letter rigorous.
It follows the guidelines to a T and can’t take any secondary considerations or the “spirit” of the law into account like what commonly happens with real world contracts.
As soon as a wise agreement is released on the Ethereum network, it can not be modified or fixed even by its original.
The only way to change this agreement would be to encourage the whole Ethereum network that a modification ought to be made and that’s virtually impossible.
This produces a really severe issue because, unlike Bitcoin Ethereum was built with the capability to create really intricate agreements and complicated agreements are very tough to protect.
With any agreement the more complicated it is, the more difficult it is to enforce as more room is left for analyses Or more provisions need to be composed to handle contingencies.
With clever agreements.
Security suggests managing with ideal precision every possible way in which an agreement could be carried out in order to make sure that the contract does only what the author meant.
Ethereum launched with the idea that “code is law”.
That is an agreement on Ethereum, is the supreme authority And nobody could overrule the agreement.
Well that all pertained to a crashing halt when the DAO event, happened.
“Dow” or DAO, stands for “Decentralized Autonomous Organization”, which allowed users to deposit cash and get returns based on the financial investments that the DAO made.
The decisions 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 very good, the code wasn’t protected extremely well and resulted in someone finding out a method to drain pipes the DAO out of cash.
Now you might say that the individual who drained pipes the DAO was a “hacker”.
Some would argue that this was just someone who was taking advantage of the loopholes he found in the DAO’s smart contract.
This isn’t very different than an imaginative lawyer, figuring out a loophole in the present law to effect a positive outcome for his customer.
What happened next is that the Ethereum community decided that code no longer is law and changed the Ethereum guidelines in order to go back all the money that entered into the DAO.
Simply put, the agreement, authors and financiers did something stupid and the Ethereum designers decided to bail them out.
The small minority that didn’t concur with this move stuck to the initial Ethereum Blockchain before its protocol was transformed which’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 talk about is Ethereum as a currency.
We’ve currently developed, that Ethereum is generally a big bunch of computers collaborating like one super computer, to execute code that powers Dapps.
This costs cash Money to get the makers to power them up, save them and cool them.
, if required.
That’s why Ether was created.
When individuals talk about the cost of Ethereum, they really are referring to Ether the currency that incentivizes people to run the Ethereum protocol.
On their computer.
This is very comparable to the way Bitcoin miners get paid for maintaining the Bitcoin blockchain.
In order to deploy a wise contract to the Ethereum platform, its author should pay to do so.
That payment is made in the type of ether.
This is done so that people will compose enhanced and effective code and won’t squander.
The Ethereum network calculating power on unnecessary tasks.
Ether was first distributed in Ethereum’s initial Initial Coin, Offering back in 2014.
Back then it cost around 40 cents to purchase one Ether.
Today, one Ether is valued in numerous dollars, because making use of the Ethereum network has actually grown tremendously due to the ICO hype that began in 2017.
Still Confused Don’t stress, we’ll get more into Ether and mining in a later on.
Ethereum’s network and Ether are an entire brand-new rabbit hole that we’ll cover, but I believe this will provide for now as an intro to Ethereum.
This concludes this week’s episode of Ethereum Whiteboard Tuesday.
Hopefully, by now you have a much better understanding of what Ethereum is A network of computers collaborating to change the centralized model of programs and business which run the Internet today. How Does Ethereum Avoid The Scaling Problem