What is Ethereum. Guide for Beginners

In order to fully understand Ethereum, what it does and how it can potentially impact our society, it is important to learn what its core properties are and how they differ from standard approaches.

First of all, Ethereum is a decentralized system, which means it is not controlled by any single governing entity. An absolute majority of online services, businesses and enterprises are built on a centralized system of governance. This approach has been used for hundreds of years, and while history proved time and time again that it’s flawed, its implementation is still necessary when the parties don’t trust each other.

A centralized approach means single-entity control, but it also means a single point of failure, which makes apps and online-servers utilizing this system extremely vulnerable to hacker attacks and even power outages. Moreover, most social networks and other online servers require users to provide at least some degree of personal information, which is then stored on their servers. From there, it can be easily stolen by the company itself, its rogue workers or hackers.

Ethereum, being a decentralized system, is fully autonomous and is not controlled by anyone at all. It has no central point of failure, as it is being run from thousands of volunteers’ computers around the globe, which means it can never go offline. Moreover, users’ personal information stays on their own computers, while content, such as apps, videos, etc., stays in full control of its creators without having to obey by the rules imposed by hosting services such as App Store and YouTube.

Secondly, it is important to understand that even though constantly compared to each other, Ethereum and Bitcoin are two completely different projects with entirely different goals. Bitcoin is the first ever cryptocurrency and a money-transfer system, built on and supported by a distributed public ledger technology called the Blockchain.

Ethereum took the technology behind Bitcoin and substantially expanded its capabilities. It is a whole network, with its own Internet browser, coding language and payment system. Most importantly, it enables users to create decentralized applications on Ethereum’s Blockchain.

Those applications can either be entirely new ideas or decentralized reworks of already existing concepts. This essentially cuts out the middleman and all the expenses associated with the involvement of a third party. For example, the only profit that comes from users ‘liking’ and ‘sharing’ their favorite musician’s posts on Facebook is generated from an advertisement placed on their page and it goes directly to Facebook. In an Ethereum version of such social network, both the artists and the audience would receive awards for positive communication and support. Similarly, In a decentralized version of Kickstarter, you won’t be getting just some artifact for your contribution to the company, you will be receiving a part of the company’s future profits. Finally, Ethereum-based applications will remove all sorts of payments to third parties for fascinating any kind of services.

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