In an age of virtual reality and autonomous cars, Ethereum just sounds like another shiny gadget – perhaps a helpful robot-servant? The dubstep of the next generation?
As entertaining as both of those ideas sound, Ethereum on the face of it is much less glamorous, but it is the springboard for all sorts of madness. Take the Internet as an example – when it started in its earliest form, it functioned as a defence network in case of nuclear attacks. Fast forward 40 years and it’s used by everyone from businessmen throwing out important emails, to procrastinating students sinking hours of valuable time into compilations of 6-second clips and mourning the loss of Vine.
Pretty mad development, right? It can happen again – and it can happen with Ethereum.
(Also, sorry for reminding you all of dubstep, I know that is best left back in 2012…)
Drop the Base
Long story short, Ether (ETH to his mates) is a cryptocurrency which runs on the Ethereum blockchain (fancy word explained a bit further down)
Some of you more technically-minded folk will already be aware of Bitcoin – the first cryptocurrency and still the most prominent. Bitcoin was first developed to allow for there to be a decentralised currency operating without the interference of banks. The word “decentralised” is thrown about a lot when it comes to cryptocurrency, but what does it actually mean? For this, we may have to get a bit technical so bear with me…
Essentially, decentralisation means that the information is not controlled by any single authority. This means that traditional currencies – like shiny Manx Pounds – are centralised as they are overseen by banks.
The main benefit of decentralisation is that no data can be erased or altered; If someone paid me back some ETH for a round I got in after work last night, I can’t be that one mate who claims I was never paid back.
Alas, the mind-bending talk will have to continue as I explain how all of this magic actually happens, and what better way to explain this magical technology than with… well, magic!
Imagine for a moment that we all have magical powers (I know, pretty cool right?). Imagine that everyone has a copy of a magic book. If someone writes on a page (or “block”) in their copy of the book, the same thing appears in that page of everyone else’s books at the same time, and the books turn to the next page – making a chain of blocks – hence “blockchain”. Now imagine someone writes a particularly naughty word in said book. That particularly naughty word cannot be erased by the person who wrote it, nor anyone else. It will be there in all it’s glory until the end of time.
This is the fundamental idea of blockchain technology, which is what Ethereum and Bitcoin are based on.
Let’s return to reality for a moment though, so I can explain the much more mundane application of this “magic book” blockchain system.
This method is used by Ethereum to allow people to basically write self-running programs known as “smart contracts”. These smart contracts can contain rules by which money would be sent to/from wallets. A good example of a smart contract is using it to make a bet. If I had some absurd newfound faith in the Manx weather and bet my mate 1 ETH that we’d have a sunny summer, I could write a smart contract which can check the weather on Google, and if (by some miracle) we had a nice tropical 25 days (or more) of sunshine this summer, the contract would send 1 ETH to my wallet.
The best thing about this is that anyone can see the code of the contract, so my mate doesn’t even have to trust me (and why would he? I’m pretty wily…).
Back to Reality
So, in the real world, the “magic books” are actually computers. Just normal computers like the ones you and I use every day. These computers all store identical copies of the data written into the Ethereum blockchain, and if someone tries to change their copy, the other computers reject it and the transaction remains how it should be – the same as all the other copies.
Did someone say free money?
So, why would anyone dedicate their computer to storing all this data? Well, anyone who chooses to use their PC power to store this data and confirm future transactions made with ETH, will get a small amount of ETH themselves for their troubles without having to do anything but leave their PC on!
Some have even gone as far as to fill entire warehouses with powerful computers, just to get their hands on some of that sweet ETH! And this is a win-win, since it means there are more copies of the Ethereum data to prevent those dodgy hackers from cheating the system.
So all in all, this means that transactions made using ETH are more secure, more open and are smarter than traditional currencies. This is already being proven by trailblazers all over the world, and also right on our own Manx soil by companies such as Quanta, who are using ETH to power an online lottery site!
Other super-useful applications of ETH include the protection of your personal data from third parties, the stock market, real estate, the writing of wills, the list can go on forever!
My advice for you now is to get ahead of the pack and look into establishing a cryptocurrency wallet and getting hold of some Ether, because the more people use it, the higher the value! We also have a handy article to help you with that so get stuck in!