How Does Ethereum Network Work

How Does Ethereum Network Work – What on earth is Ethereum I mean I keep hearing about it all the time I’ve seen it’s the 2nd biggest cryptocurrency around, but I just can’t seem to wrap my head around it.

How Does Ethereum Network Work

Is it as innovative as Bitcoin? Can it in fact alter the world as we understand it If you want to have a much better understanding of Ethereum, but are tired of descriptions that sound like total technical mumbo jumbo, remain … Here on Bitcoin, Whiteboard Tuesday, or must I state, Ethereum, Whiteboard Tuesday, we’ll answer these concerns And more.
Before we enter Ethereum, we require to do a quick wrap-up about Bitcoin considering that it’s the basis from which Ethereum was born.
By now you probably understand that Bitcoin is a form of decentralized money, and if you still have some concerns about what that implies or how it works, then you might consider reviewing our original video “what is Bitcoin”.

Prior to Bitcoin was developed.
The only way to use money digitally was through an intermediary like a bank or Paypal.
Even then, the money used was still a federal government issued and controlled currency.

Nevertheless, Bitcoin changed all that by developing a decentralized type of currency that individuals could trade straight without the requirement for an intermediary.
Each Bitcoin transaction is validated and verified by the entire Bitcoin network.
There’s, no single point of failure, so the system is practically difficult to shut down, control 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 much better served on a decentralized system.
What about voting Voting requires a main authority to count and validate votes.

Real estate transfer records presently utilize centralized home registration.
Authorities.
Social networks like Facebook are based upon central servers that manage all of the information we upload to them.

What if we might use the technology behind Bitcoin, more commonly referred to as Blockchain to decentralize other things too.
The fascinating aspect of Blockchain technology is that it’s, really, the spin-off of the Bitcoin innovation.
Blockchain technology was created by fusing currently existing technologies like cryptography proof of work and decentralized network architecture together in order to create a system that can reach decisions without a central authority.

There was no such thing as “blockchain innovation” before Bitcoin was developed.
But once Bitcoin became a reality, individuals began discovering 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 build programs and applications.

A currency like Bitcoin is just among the choices.
So this got people very fired up and they started to explore.
What else can we decentralize.

In order for a system to be truly decentralized? It requires a big network of computer systems to run it.
Back.
The only network that existed was Bitcoin and it was quite limited.

Bitcoin is written in what is called a “turing insufficient” language, that makes it comprehend only a small set of orders like who sent how much money to whom.

If you want to produce a more complex system, you’ll need a different shows language, which implies a different network of computer systems.
Imagine for a second.

You wished to construct your own decentralized program, much like Bitcoin in the house.
You ‘D need to understand how Bitcoin’s decentralization works.
Write code that imitates the same behaviour, get a huge network of computers to run this code and so on … And that is a lot of work.
Enter.
Ethereum.

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 develop a decentralized program that no single person controls, not even you, even though you composed it all you have to do, is find out the Ethereum programs language called Solidity and begin coding.

The Ethereum platform has countless independent computer systems running it, indicating it’s fully decentralized.

Once a program is deployed to the Ethereum network, these computer systems, also referred to as nodes, will ensure it executes as composed.
Ethereum is the facilities for running Dapps worldwide.

It’s, not a currency, it’s, a platform.
, The currency used to incentivize the network is called Ether, however more On that, later.
Ethereum’s goal is to really decentralize the Internet.

Wait.
The internet is centralized.
I thought the Internet currently was decentralized which anyone can begin their own website.

, While in theory that may be true in practice: Amazon, Google, Facebook, Netflix and other giants control.
The majority of the world wide web, as we know, it.
There’s, almost no activity online, that happens without some sort of 3rd or intermediary party.

, But when the concept of digital decentralization was demonstrated by Bitcoin an entire new range of chances became available.
We can finally begin to envision and design an Internet that connects users directly without the need for a central 3rd party.
People can “lease” hard disk area directly to other individuals and make Dropbox obsolete.

Motorists can use their services directly to passengers and get rid of “Uber” as the Middleman.
Individuals can purchase cryptocurrencies directly from one another without the requirement for an exchange that can get hacked or take.
Your cash. How Does Ethereum Network Work

Ethereum allows individuals to link straight with each other without a main authority to take care of things.
It’s, a network of computers that together integrate into one powerful, decentralized, supercomputer.
Ok, So now you understand what Ethereum does, but we haven’t touched upon 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 real life, all a contract is is a sets of “Ifs” and “Thens”.
Implying 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 clever agreements deal with Ethereum.
Ethereum developers write the conditions for their program or Dapp, and after that the ethereum network executes it.

They are called smart contracts since they handle all of the elements of the contract enforcement efficiency, payment and management.

For example, if I have a wise contract that is utilized for paying lease, the landlord doesn’t need to actively collect the cash.
The contract itself, “understands”.
If the cash has actually been sent.

If I certainly sent the cash, then I will be able to open my home door.
If I missed my payment, I will be locked out.
However, clever contracts also have their drawbacks.

Going back to my previous example.
Rather of having to toss out an occupant that isn’t paying a “clever” agreement would lock the non-paying renter out of their house.

A really intelligent agreement, on the other hand, would take into consideration other elements as well, such as extenuating situations, the spirit with which the agreement was composed, and it would also be able to make exceptions if necessitated.

To put it simply, it would act like a truly good judge.
Instead, a “clever contract” in the context of Ethereum is not intelligent at all.
It’s, actually uncompromisingly letter stringent.

It follows the rules to a T and can’t take any secondary factors to consider or the “spirit” of the law into account like what typically happens with real world contracts.
As soon as a wise agreement is released on the Ethereum network, it can not be modified or remedied even by its initial.
Author.

It’s immutable.

The only way to alter this contract would be to encourage the entire Ethereum network that a change must be made which’s practically difficult.
This develops a really serious problem because, unlike Bitcoin Ethereum was built with the capability to create really complicated agreements and intricate agreements are extremely hard to protect.

With any contract the more complicated it is, the more difficult it is to implement as more space is left for interpretations Or more stipulations must be written to deal with contingencies.
With smart contracts.
Security indicates handling with ideal accuracy every possible method which a contract might be executed in order to make certain that the agreement does just what the author meant.

Ethereum released with the concept that “code is law”.
That is an agreement on Ethereum, is the supreme authority And nobody could overthrow the agreement.
Well that all came to a crashing halt when the DAO occasion, took place.

“Dow” or DAO, represents “Decentralized Autonomous Organization”, which enabled users to transfer money and get returns based upon 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 secured extremely well and led to someone finding out a method to drain pipes the DAO out of cash.
Now you might say that the individual who drained 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 smart contract.
This isn’t really different than an imaginative legal representative, determining a loophole in the existing law to effect a favorable result for his customer.

What occurred next is that the Ethereum neighborhood decided that code no longer is law and altered the Ethereum guidelines in order to go back all the money that entered into the DAO.

Simply put, the contract, writers and financiers did something stupid and the Ethereum designers chose to bail them out.
The small minority that didn’t agree with this relocation stuck to the original Ethereum Blockchain prior to its protocol was transformed which’s how Ethereum Classic was born, which is Actually, the original Ethereum.
We’ve covered a lot up previously, and the last thing I want to discuss is Ethereum as a currency.

We’ve currently developed, that Ethereum is essentially a big bunch of computer systems collaborating like one very computer, to carry out code that powers Dapps.
This expenses money Money to get the makers to power them up, store them and cool them.
, if needed.

.

That’s why Ether was created.
When individuals speak about the rate of Ethereum, they really are referring to Ether the currency that incentivizes people to run the Ethereum procedure.
On their computer system.

This is extremely similar to the method Bitcoin miners earn money for preserving the Bitcoin blockchain.

In order to deploy a smart contract to the Ethereum platform, its author must pay to do so.
That payment is made in the form of ether.

This is done so that people will compose enhanced and effective code and won’t squander.
The Ethereum network computing power on unneeded jobs.
Ether was very first distributed in Ethereum’s initial Initial Coin, Offering back in 2014.

At that time it cost around 40 cents to buy one Ether.
Today, one Ether is valued in numerous dollars, considering that making use of the Ethereum network has grown tremendously due to the ICO hype that started in 2017.

Still Confused Don’t worry, we’ll get more into Ether and mining in a later.

Ethereum’s network and Ether are an entire new rabbit hole that we’ll cover, however I think this will do for now as an intro to Ethereum.
This concludes this week’s episode of Ethereum Whiteboard Tuesday.
Ideally, by now you have a much better understanding of what Ethereum is A network of computers collaborating to change the central design of programs and business which run the Internet today. How Does Ethereum Network Work

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