Ethereum is a platform for creation of decentralized applications running on blockchain, through the use of smart contracts.
In March 2016, within less than a year of its existence, that growth culminated in Ethereum achieving a record-breaking market capitalization of over $1B.
Since then, the passions have subsided and Ethereum has declined a bit. However, the coin is now second only to Bitcoin on the cryptocurrency market capitalization list.
Why is Ethereum so hot?
Well here’s the short version: Ethereum is decentralized, like Bitcoin, but is capable of much, much more.
The way Bitcoin’s peer-to-peer network is decentralized and distributed, where every participant is a client and a server at the same time, allows for unprecedented increase in that network’s security and resilience.
In legacy systems, where the entire network is handled by a single server entity, it becomes a weak point, which may be exploited by potential attackers.
On the other hand, decentralized networks are:
Very resistant towards hacker attacks;
Have zero downtime, even if some of their parts go down;
Are not run by specific, limited number of people (having people in charge can cause additional problems, both intentionally and unintentionally, due to the notorious human factor).
In addition to all those characteristics, one of the most important features of blockchain and, by extension, Bitcoin is the integrity of data.
Records of every transaction ever made in the Bitcoin network can be accessed by anyone, are easily traceable to the pseudonyms of the sender and receiver (but not to their real-life identities), and are virtually unalterable.
Thus, nobody can trick each other, by, for example, spending the coins which they don’t actually have.
These advantages are very important for a payment protocol, but some developers have quickly realized that that utility doesn’t end with one simple use case.
Basically, any area, where you need to keep a registry of some data, can be made more secure and efficient with the blockchain:
- Domain names;
- Ownership records;
- Business contracts, etc.
The future of Ethereum
Considering everything that was mentioned so far, the reasons for Ethereum to be in the spotlight right now should be quite obvious.
And although at this point it’s highly unlikely for the coin to ever fade into obscurity, the speed and scope of its future growth will depend on many factors.
Yes, Ethereum gives the promise of unlimited opportunities. But whether that promise is going to be fulfilled, and to what extent, depends on how powerful the network will become, and how talented and creative will the developers of particular solutions be.
So far, the developers tried to produce new apps based on the blockchain in two distinct ways, both of which have been ultimately ineffective.
The first option was to build an app on top of Bitcoin. However, Bitcoin’s script is not Turing complete, i.e. it cannot solve the problems that are easily solvable by some known programming languages, such as C++, for example.
That is associated with technical complications and requires a developer to introduce all kinds of “crutches” to make it work.
Other option was to develop, launch and promote you own alternative blockchain, thus depriving yourself of the opportunity to use the immense power of the whole Bitcoin’s network.
Instead, you will have to run your own blockchain, which is associated with high costs, that can not be justified for every app.
Ethereum has solved this discrepancy for the first time ever, by integrating a proper, all-purpose programming language with its own blockchain.
With it, anybody can think of any possible application, easily code it and offer the ETH network to execute it.
Quite simply put, Ethereum is a worldwide distributed decentralized computer with a theoretically unlimited power.
A developer codes a solution and deploys it in the network. Then the network executes it by itself, verifies the outputs by itself and distributes value between the participants by itself.
The applications run in an absolutely transparent manner, without any input from central authorities, achieved with the help of smart contracts.
The cherry on the cake is that the network’s power is only limited by the number and power of the computers, which are connected to it, i.e. it isn’t: keep in mind, that there are no barriers to entry.
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