I have heard of Bitcoin but what is Ethereum?
While bitcoin (traditionally) allows simple addition and subtraction operations, which are sufficient for exchange of cryptocurrency, Ethereum enables more sophisticated operations.
Ethereum positions itself as a programmable blockchain. Ethereum takes the blockchain concept popularised by bitcoin and introduces a full Turing-complete virtual machine on top of it. The machine is capable of executing code, which is usually written in Solidity programming language.
But what does it do?
Most commonly, the programmable code is termed as a smart contract; it establishes conditions under which things of value are exchanged. In other words, instead of using a traditional legal framework to bind two parties, there is code deployed within the blockchain which automatically enforces an agreed contract. The contract could be as basic as "money is transferred from an escrow account to Alice's account, only when today is a Sunday". Or it could be more complex funds transfer, such as what's required in an auction. The entire auction system could be implemented in terms of smart contracts!
In broader terms, Ethereum allows creation of DApps (decentralized applications). It opens up the blockchain for innovative solutions.
Still, what exactly is a smart contract?
While blockchain eliminates the need for a centralized authority for record keeping and reconciliation, smart contracts extend the concept further by eliminating the middle-man completely, even for definition and execution of conditions under which exchange of goods and services take place.
Smart contracts are part of blockchain transactions. Execution of a smart contract is initiated by sending a message embedded in a transaction.
And which node in the network runs the smart contract?
All of them! Remember, the blockchain is replicated---everyone has a copy. All (full) nodes independently execute the smart contract. See this Ethereum Stackexchange post for more information.
But who pays for the resource/ hardware utilization?
The developer who created the contract! There is a concept of gas in Ethereum and similar platforms. The gas price is an upper limit on computational resources that a contract can consume. All operations (such as read and write) require a certain amount of gas to be available.
So, all business logic in the world will get implemented as smart contracts in the future?
I am interested in going much deeper.
For that, see The Hitchhikder’s Guide to Smart Contracts in Ethereum.
Below is a DEVCON1 video from 2015 where Vitalik Buterin, the creator of Ehtereum, explains some key concepts and the application of the technology:
Ethereum positions itself as a programmable blockchain. Ethereum takes the blockchain concept popularised by bitcoin and introduces a full Turing-complete virtual machine on top of it. The machine is capable of executing code, which is usually written in Solidity programming language.
But what does it do?
Most commonly, the programmable code is termed as a smart contract; it establishes conditions under which things of value are exchanged. In other words, instead of using a traditional legal framework to bind two parties, there is code deployed within the blockchain which automatically enforces an agreed contract. The contract could be as basic as "money is transferred from an escrow account to Alice's account, only when today is a Sunday". Or it could be more complex funds transfer, such as what's required in an auction. The entire auction system could be implemented in terms of smart contracts!
In broader terms, Ethereum allows creation of DApps (decentralized applications). It opens up the blockchain for innovative solutions.
Still, what exactly is a smart contract?
While blockchain eliminates the need for a centralized authority for record keeping and reconciliation, smart contracts extend the concept further by eliminating the middle-man completely, even for definition and execution of conditions under which exchange of goods and services take place.
Smart contracts are part of blockchain transactions. Execution of a smart contract is initiated by sending a message embedded in a transaction.
Icons made by Locked from www.flaticon.com is licensed by CC 3.0 BY
And which node in the network runs the smart contract?
All of them! Remember, the blockchain is replicated---everyone has a copy. All (full) nodes independently execute the smart contract. See this Ethereum Stackexchange post for more information.
But who pays for the resource/ hardware utilization?
The developer who created the contract! There is a concept of gas in Ethereum and similar platforms. The gas price is an upper limit on computational resources that a contract can consume. All operations (such as read and write) require a certain amount of gas to be available.
So, all business logic in the world will get implemented as smart contracts in the future?
Hold your horses! Ethereum Virtual Machine is not your Virtualbox VM! Ethereum Wiki says
...a good heuristic to use is that you will not be able to do anything on the EVM that you cannot do on a smartphone from 1999Besides, and more importantly in my opinion, smart contracts are immutable. What are the odds that every smart contract you ever develop is 100% bug free? To my mind, getting smart contracts right would be the biggest obstacle as the technology gets widespread adoption, in addition to getting various parties agree on a blockchain protocol in the first place.
I am interested in going much deeper.
For that, see The Hitchhikder’s Guide to Smart Contracts in Ethereum.
Below is a DEVCON1 video from 2015 where Vitalik Buterin, the creator of Ehtereum, explains some key concepts and the application of the technology:
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