Ethereum and Smart Contracts
According to the main sentence on the Ethereum website, “Ethereum is a global, open-source platform for decentralized applications. On Ethereum, you can write code that controls digital value, runs exactly as programmed, and is accessible anywhere in the world.” However, Bitcoin as a best cryptocurrency to invest, main objective is transferring value, the purpose of the Ethereum system is to decentralize: the way we send and receive information, build businesses, pay for things, and more. So that many people best cryptocurrency to invest.
At its simplest, Ethereum is an open-source platform based on blockchain technology that enables programmers to build and extend decentralized applications.
Ethereum is an entirely different community from Bitcoin, and it has its blockchain. Unlike Bitcoin creator “Satoshi Nakamoto,” we ultimately know who is the founder of Ethereum (Vitalik Buterin), and he’s still very much involved with the different projects on Ethereum.
While the blockchain of Bitcoin is employed to track ownership of a cryptocurrency (bitcoins), the Ethereum blockchain concentrates on building the programming code of decentralized applications.
In the Ethereum blockchain, miners instead of gaining bitcoin, process Ethereum blockchain blocks and transactions to earn Ether, a kind of crypto token that feeds the network. Away from a tradeable cryptocurrency, Ether is also used by developers to pay for transaction fees and other different services on the Ethereum network.
There is a second type of token on Ethereum network which is used to pay miners rewards for including transactions in the blockchain of Ehtereum block, it is called gas, and launching all smart contract needs a certain quantity of gas to be sent along with it to interest miners to put it in their block.
At present, Ethereum is operating on a Proof-of-Work protocol; however, in the future will be turning to a Proof-of-Stake protocol.
Current Protocol: PoW
The existing Ethereum network employs a consensus algorithm explicitly built for the Ethereum blockchain named Ethash. The Ethereum blockchain intends to limit large mining pools from obtaining improper control over the Ethereum blockchain network.
Future Protocol: PoS ( Ethereum 2.0)
A Proof of Stake consensus algorithm gives the right to users who want to verify blocks and obligated to deposit a stake of their own Ether (estimated to be 32 ether). Stakes will be locked by Ethereum network, and only these selected users can participate in the consensus algorithm.
Two types of Proof-of-Stake algorithms are chain-based proof, and Byzantine Fault Tolerance-style proof:
Chain-based Proof-of-Stake users are picked randomly during a fixed time block, Selected staked user is allowed to build a single block, which needs to be pointed to a previous block.
A BFT-style proof randomly assigns users the right to propose blocks. However, obtaining approval on the approved block takes place through multiple processes.
The Ethereum roadmap includes a transition to Proof of Stake at an indefinite time in the future.
“Ethereum is an open-source platform based on blockchain technology that enables programmers to build and extend decentralized applications. “
Smart contracts are similar to the usual contracts that will allow users to exchange goods, money, shares, or anything valuable in a transparent, conflict-free way while avoiding the services of a middleman. They are executed, extended, and build in Ethereum network.
Smart contracts are the digitized form of a legal contract. Smart contracts can store data which can be used to record information, fact, associations, balances, and any other information needed to implement the logic for real-world contracts.
A smart contract can work on its own. However, it can also be performed along with other smart contracts. They can be launched in a way when they’ll be dependant on one another.
The primary applications of smart contracts
Polls, casinos, lotteries, and so on. But mainly, smart contracts have made it easier to attract IPO and ICO-style funds.
It is challenging for all voting system to be rigged; however, smart contracts would reduce all issues by implementing an unbelievably more secure system. Ledger-protected votes would need to be decrypted and require excessive computing power to access.
During renting an apartment, people required to pay an intermediary person such as Craigslist or a newspaper to advertise and then again they need to pay someone to validate that the person paid rent. Smart contracts cut your costs. All you do is pay via bitcoin and encrypt your contract on the blockchain.
Finally, everyone can see how many shares have been issued and how they have been divided among the participants. Besides, blockchain protects attendees against project owners from secretly selling extra actions, or someone selling a stock several times to different people.
Smart contracts advantages are:
Autonomy — Smart contracts eliminate the third-party. relying on a broker, lawyer, or other intermediaries are not required.
Trust — Your documents are encrypted on a shared ledger. There’s no way that someone can steal any of your materials. Furthermore, users don’t have to trust people.
Speed – People usually have to spend pieces of time and to prepare documents manually. Smart contracts employ codes to automate tasks, thereby shaving hours off a range of business processes.
Savings — Notaries, estate agents, advisors, assistance, and many other intermediaries are not needed thanks to smart contracts. And, by extension, the extortionate fees associated with their services.
Safety – Your documents and any other materials will be kept safe using Cryptography and encryption of websites. There is no hacking. In fact, it would take an abnormally smart hacker to crack the code and infiltrate.
Accuracy – Automated contracts are not only faster and cheaper but also avoid the errors that come from manually filling out heaps of forms.
“Smart contracts are similar to the usual contracts that will allow users to exchange goods, money, shares, or anything valuable in a transparent, conflict-free way “