Ethereum Guide

If you’ve heard of Bitcoin, you must also know what Ethereum is. Even if you don’t and are curious to find out, you can refer to the below information. You will find all you need to know about the Ethereum guide. So, let’s begin.

What Is Ethereum?


You can think of Ethereum as an independent blockchain platform. Ethereum comes with its crypto, known as Ethereum or Ether (ETH), and programming language, i.e., Solidity. As Ethereum is a blockchain network, it acts as a decentralized ledger for recording and verifying transactions.

As a user of Ethereum Blockchain, you can create, monetize and use applications on the platform. Also, you can use its cryptocurrency, which is Ether, as the mode of payment. Such applications are referred to as DAPPs.

Why was Ethereum created?


The two primary motives of creating Ethereum were to help developers:

  • Create and publish smart contracts.
  • Create apps without downtime, fraud, or interference from a 3rd party.

Ethereum is a programmable blockchain. And this is what distinguishes Ethereum from Bitcoin. You can easily use Ethereum for games, financial services, apps. And the best thing is that all these services can use Ether as a payment mode. Also, Ethereum ensures complete safety and fraud-proof transactions.

Founder of Ethereum


Some blockchain enthusiasts, in July 2015, launched Ethereum. One of the enthusiasts was Joe Lubin, who’s also the founder of ConsenSys. Another co-founder and the public face who’s credited for giving this concept to Ethereum is Vitalik Buterin. Born in 1997, Vitalik Buterin is the world’s youngest crypto billionaire.

The founders created Ether as crypto for usage in the Ethereum blockchain. However, with time, several merchants are accepting Ether just like Bitcoin. Shopify, CheapAir, and Overstock being some common examples.

What are some common features of Ethereum?


Let’s focus on some features to understand better what Ethereum offers:

Banking option for all


If you have a bank account, you would know how tedious the account opening process is. You need to submit your identity proofs and whatnot. Also, an extensive option of our community is unable to open bank accounts. All because of a lack of valid ID proof.

Well, Ethereum solves this problem. For you to send or receive crypto, all you require is the internet. And you’re done. Ethereum requires minimal details to get you going.

Privacy


When it comes to privacy, digital currency apps require a lot of details. Your address, phone number, government ID, your photo, and whatnot. However, this is not what Ethereum focuses on. Instead, Ethereum lays the stress of delivering value and not surveilling its customers.

P2P Network


Ethereum allows a peer-to-peer network. It means you can directly send or receive crypto without involving any intermediaries.

No censorship


The banks monitor and can limit your transactions. However, it’s not the case with Ethereum. No company or government controls Ethereum. So, no one would be able to stop you from receiving or sending funds.

Smart Contracts


Ethereum focuses on equality. You’ll only get your hands on the funds if you fulfill the conditions you agreed upon. There is no need for an external company to enforce the contract for you.

Compatibility


All Ethereum products are compatible with other services and software. It means there won’t be an issue with integration in the future.

How to Use Ethereum?


For you to use Ethereum, you should purchase it in the first place. So let’s find out how.

Selecting an Ethereum Exchange


It would be best if you found a reliable Ethereum exchange online. Different exchanges will have different ID requirements, transaction fees, currency support, etc. So, you need to check this before creating an account on the exchange. Here are some reliable Ethereum exchanges out there:

  • Kraken
  • Bitfinex
  • Coinbase
  • DAX
  • Poloniex
  • Bittrex
  • Uphold
  • HitBTC
  • Gemini

Create an account


You can create an account via a website or via an exchange application. You need to add your personal information for account creation, like your name, ID, and SSN. Such details vary with the exchange platforms as well. Also, governments require exchanges to ask for these details for good.

Add a payment method.


Now, it’s time for the payment method. You need to add a payment method according to your location and exchange platform. Some platforms accept wire transfers, bank transfers, credit cards, debit cards, etc. However, certain platforms only accept Bitcoin as the payment method. So, make sure to confirm this before choosing the exchange platform.

Purchase Ether


It’s finally time to purchase Ether. The price of Ether keeps on changing. So, there’s no fixed amount of Ether you’ll get in exchange for 1 Pound, Euro, or Dollar. However, you need not purchase a whole Ethereum coin. The currency is divisible. So, you can buy small fractions of an Ethereum coin like 0.001 or 0.000001 Ether. It means you can start small without investing much.

How to store Ether?


Now that you have Ether, it’s time to store it. Let’s understand how.

Hardware wallets


Hardware wallets are an impeccable way to store Ethereum offline.

  • Trezor
  • Ledger Nano S
  • KeepKey

These wallets are actual physical devices that you can buy online. Once your device arrives, you can store the PIN and recovery phrase. The PIN allows you entry into the wallet. And the recovery phase helps in recovering the wallet if it gets damaged. Make sure to write your recovery key down on paper. It’ll help you with recovery in case something weird happens.

Now, you can receive or send funds using the wallet software with ease. However, make sure to check for typos before proceeding with a transaction. Also, it’s better that you intentionally try to recover the wallet. It’ll help you confirm everything.

Online wallets


The online wallets are easy to set up, free but are less safe than hardware ones. Online Ethereum wallets can be wallet applications or exchange platforms. Here are some reliable ones:

  • Mist – Desktop
  • MyEtherWallet – Desktop

Once you create an account, you can set up a username or PIN along with a recovery phrase. It’s improbable that you lose your wallet. It’s because the wallet stays on the company’s server. However, it’s better to create a backup on paper in case something goes wrong.

Now that you are through these steps, you can make transactions. You can use a QR code or manually use the Ethereum wallet address for making transactions. There are other options like paper wallets. But you won’t find any paper wallet in our list as it’s not as popular as the above.

How can you use Ethereum?


Here’s how you can use Ethereum:

Debit Cards


If you want to spend Ether wherever VISA is accepted, you can opt for Ethereum Debit cards. You can get an Ethereum debit from any of the below platforms:

• TokenCard
• UquidX
• Monaco

Ethereum Shopping


You can use Ethereum to purchase several services and products. In addition, several companies accept Ethereum as the mode of payment. Common examples are:

  • CreditSuisse
  • Mastercard
  • Brave
  • Toyota
  • Samsung
  • Intel
  • Microsoft

Ethereum Investing


You can either buy and hold Ethereum coins. Or you can also sell it in a short time for quick profits. However, because of its volatile nature, only professionals should invest in Ethereum. Here are some platforms you can use:
• Gemini
• Bitfinex

  • Gemini
  • Bitfinex
  • DAX
  • HitBTC
  • Kraken
  • Bittrex
  • Poloniex
  • Coinbase

How does Ethereum Works?


Let’s now talk about how Ethereum works:

You should know that Ethereum is both a cryptocurrency and a blockchain network. So, the cryptocurrency Ethereum is backed by the Ethereum blockchain. It’s pretty similar to other cryptocurrencies like Bitcoin, Ripple, etc.

The Ethereum blockchain, similar to the original blockchain, is a decentralized network. A network that is acting as a public ledger that records and verifies the transactions on the platform. Every member on this Ethereum blackchin has access to a copy of the Ethereum blockchain. This allows them to view past transactions.

Also, Ethereum is a decentralized network. It means there’s no centralized authority managing or controlling its operation. Instead, the ledger holders on the network manage the Ethereum transactions.

Security & Mining of Ethereum:


The Ethereum blockchain uses cryptography for securing and verifying transactions. People, aka miners, use special computers for solving complex math problems. These math problems confirm every transaction taking place on the network. It’s through this process new blocks come into existence.

The miners with special computers who solve complex problems receive crypto tokens as rewards.
And in this case, the crypto tokens are called Ether.

Uses of Ether of Ethereum:


Ether is quite similar to Bitcoin. You can use it to purchase and sell services and goods. Also, in the past few years, the value of Ether has only increased.

However, there’s a unique feature to the Ethereum blockchain. It allows its users to create applications that run on Ethereum blockchain like software on a computer. Such applications are capable of securely managing financial transactions.

What affects the price of Ethereum?


Factors affecting the price of Ethereum are different from the ones affecting traditional currencies. Here are those factors:

Availability: Now, the supply of Bitcoin is limited. Miners can mine at max 21.5 million Bitcoins. However, it’s not the case with Ethereum. There’s no limit as to how many Ethereum coins or Ether can come into existence. However, Ether coins are lost and added with time. This destruction and addition of Ethereum can cause fluctuation in Its availability. As a result, the price can vary.

Media: Media has a lot of impact on almost everything. And Ethereum or crypto is no exception. If there’s negative coverage regarding security and reliability, the prices can dip. Also, the overall value can reduce.

Regulation: Presently, there’s no central body that has control over the crypto. However, in the years to come, if this changes, the value of Ethereum can fluctuate.

Technological Advancement: Although blockchain’s future is uncertain, its involvement in different technologies can still increase its value.

What Is a Decentralized Application?


Any computer application running on a decentralized system is a decentralized application. It’s a combination of a front-end UI and a smart contract. The backend code in a DAPP runs on a decentralized P2P network. It’s in contrast to regular apps, which have centralized servers controlling the applications.

Similar to other computer applications, you can use any programming language to create DAPPS. Let’s understand some features of DAPPS:

Decentralized: DAPPS are entirely independent. It means no group controls the functioning of decentralized apps.

Isolated: You can execute DAPPs in a virtual environment, i.e., Ethereum virtual machine. So, even if there’s a bug in the smart contract, the entire blockchain won’t cease to function.

Turning Complete: DAPPs can perform almost any function if the required sources are available.

Deterministic: The DAPPs can perform the same function regardless of the environment they’re executed in.

What is an on-smart contract?


A smart contract is essential for creating DAPPs. For deeper insights on smart contracts, you can refer to this link. A smart contract is a code in the Ethereum blockchain. This code executes in the way it’s programmed.

Also, once the code is uploaded to the Blockchain network, you cannot make variations. It’s because the logic exists in the code and is embedded into the smart contract. So, you need to confirm the logic details several times before executing an agreement.

What are the benefits of DAPPs?

No downtime


DAPPs ensure a hundred percent uptime because of the smart contracts. Furthermore, the Ethereum network serves clients who want to interact with the smart contract. Because of this, the hackers cannot launch DoS attacks.

No Censorship


No authority can stop you from deploying DAPPs, reading data, or transacting on the blockchain.

Privacy


With apps, you can stay completely anonymous. However, it means you need to enter your personal information, unlike other applications.

Full Data Integrity


The data on the Ethereum blockchain is indisputable and immutable. All because of a cryptographic system that works in the background. Hackers or intruders cannot forge the information which is already public.

Verifiable Behavior


When it comes to smart contracts, the behavior is entirely predictable. There’s no need for you to rely on central authorities to enforce an agreement. Earlier it was not like this. People had to trust the banking systems with their financial information and data.

What are some implications of DAPPs?

Hard to maintain


As the data on the blockchain is hard to tweak, this can make it hard to maintain the DAPPs. Also, it’s hard for developers to introduce necessary updates in their DAPPs. Furthermore, rectifying bugs is hard in DAPPs.

Performance overhead


The performance overhead in the case of DAPPs is relatively high. Also, it becomes hard to scale the overhead. Ethereum aspires to achieve a super high level of integrity, security, reliability, and transparency. However, it’s good but requires a lot of unnecessary computation power and time. This takes the overhead at 1,000,000 times than the existing computation.

User Experience


With DAPPs, it’s a bit harder to create an easy User interface. Also, an average-backed user might find it hard to set up tools necessary for interacting with the blockchain.

Centralization


If the entire system becomes user and developer-friendly, it can defy the whole purpose of decentralization. It’s because to offer the above privileges, the developers might have to store the data on the server-side or a centralized network. This can affect most if not all advantages of a decentralized system.

Congestion of network


As per the present model, if a DAPP uses numerous computational resources, a back of the entire network is made. Presently, 10-15 transactions can take place per second. However, if more tractions take place in less time, it can lead to network congestion.

What are DAOs?


DAOs stand for Decentralized autonomous organizations. You can think of DAOs as a group of like-minded people working together towards the same goal. DAOs function in place of a central agency to manage and operate a system.

All the decisions within the DAOs take place with the agreement of its members. And this is what helps in making the system decentralized. After all, there’s no CEO affecting the decisions within the organization.

How do the DAOs work?


A smart contract is what powers the DAOs. The smart contract has all rules for the organization and also holds the treasury of the group. So, once the contract is uploaded on the Ethereum blockchain, you cannot introduce any changes except by voting.

If anyone tries to perform operations different from the contract, the changes won’t happen. Also, as smart contracts define the treasury, no one can spend the money without mutual agreement. It simply means that DAOs require no central authority for managing the tasks. Instead, there is a group of people who authorize payments and make decisions based on votes.

Why is Ethereum ideal for DAOs?


Here’s why:

  • Ethereum has a well-established and distributed consensus that organizations can trust.
  • No one can modify smart contracts, not even the owners. This helps DAO to operate with the rules it was based upon.
  • With smart contracts, you can receive/send funds. And without these, you’ll need a central authority.
  • Ethereum’s community is more collaborative than competitive.

Why are DAOs necessary?


DAOs have several advantages over traditional groups/organizations. One such advantage is trust. Now, for traditional institutions, you need to prove that your system is the best for your investors and the general public. However, with DAO’s, you need only to confirm that the code is correct. And as the code is public, anyone can verify its legitimacy.

Also, the community or the group approves any and every decision which the DAO takes. It makes the entire system verifiable and transparent. Unlike traditional organizations, there’s no hierarchy. It means any stakeholder can propose an innovative idea, and it won’t go unnoticed. Once you present the idea, the entire group will consider it.

Ethereum FAQ


Here are some commonly/frequently asked questions about Ethereum:

What is it that differentiates Ethereum from Bitcoin?


Bitcoin and Ethereum are pretty much the same. After all, both are cryptocurrencies. Both Ethereum and Bitcoin use a digital ledger which is blockchain. It records and verifies the transactions taking place on the network.

However, the purpose is what makes Ethereum different from Bitcoin. The primary purpose of Bitcoin is to act as a value storage system. However, for Ethereum, the goal is different. It aims at decentralizing different types of applications ranging from social media to financial applications.

Why do some individuals refer to Ethereum as ‘world computer’?


Several authorities term Ethereum as a ‘world computer’ because of its potential to decentralize the internet. Ethereum can replace the centralized servers with tens of thousands of ‘nodes. Such nodes are operated by individual volunteers across the world, forming a ‘world computer.’

The main idea behind this is that maybe, one day, everyone worldwide will be able to use this system.

How do Ethereum apps work?


There are tons of applications for you to download, ranging from messaging to financial apps. Ethereum aims at creating applications looking similar to these but performing differently.

Ethereum aims at returning the control of data to the hands of the owners. Apps based on Ethereum functionality are referred to as decentralized applications. Also, it’s necessary for the users to have Ether to operate the application.

What’s the Future of Ethereum?


There’s been a healthy skepticism around Ethereum since the beginning. One of the reasons behind that is scalability. Ethereum is not easy to scale. It simply means that Ethereum cannot support millions of users. As a result, the whole idea of the ‘world computer’ perishes.

However, launched on 1st December 2020, Ethereum 2.0 aims at fixing these issues. In addition, there are other scaling systems like Raiden that could help in the easy scaling of Ethereum. So, in a nutshell, some shortcomings are yet to be addressed. However, these shortcomings are expected to wither away in the coming future. So, you can say that Ethereum has a bright future ahead.