What is Ethereum and what can it do for you?
Ethereum is a technology that leverages a way to confidently know what transactions were conducted (a distributed ledger protected from tampering). In this way it is similar to Bitcoin, but it differs in that Ethereum was designed to enable smart contract execution. What this means is that not only can the Ethereum blockchain support the use of cryptocurrencies, but now applications can be written on top of this distributed ledger, and those applications can be written in ways that will automatically execute when certain criteria have been met.
Unlike the Bitcoin network, the primary purpose of Ethereum is not to act as a form of currency, but to allow those interacting with the Ethereum Network to make and operate ‘smart contracts’ without having to trust each other or use a middleman. Smart contracts are applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third party interference – a smart contract will work exactly the same every time it is used.
Ethereum uses a ‘virtual machine’ to achieve all this. This virtual machine is like a version of the Internet, but one where the Internet’s servers and clouds are replaced with a network of systems called nodes. The nodes are a giant, global computer made up of many individual computers running the Ethereum software.
There are thousands of distributed nodes in the network all storing the blockchain. The more nodes there are, the safer the network and its data become. It isn’t stored on your computer, or in a central server that can be controlled by any one force, it is stored across the network of nodes.
The information held on the Ethereum blockchain is verified by consensus, meaning more than half the nodes must agree that information is correct before it is allowed onto the blockchain.
Hacking this kind of system is incredibly hard because you would have to control more than 51% of the Ethereum blockchain to force a consensus.
The virtual currency unit that allows this system to work is called ether, or ETH. People interact with the Etherum network by using ether to pay the network to execute smart contracts.
Ethereum enables distributed applications, or Dapps.